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SAARC 2007 Focus: Trade

South Asia: Growth and Regional Integration
Trade among South Asian countries
(More on Trade »)

Challenges

• The cost of trading across borders in South Asia is one of the highest in the world.
• South Asian countries have maintained a higher level of protection within the region than with the rest of the world.
• Intraregional trade is less than 2% of GDP, compared to more than 20% for East Asia.
• It takes on average more than 33 days to export from South Asia compared to 12 days from OECD countries and more than 46 days to import into South Asia compared to 14 days for OECD.
• South Asian exports lacks diversity in terms of products and markets.
• The import-substitution policies of South Asia worked toward limiting not just total trade but in some ways asymmetrically toward limiting intraregional trade.
• With the possible exception of Sri Lanka that had undertaken significant liberalization in the late 1970s, anti-trade policies remained dominant in the region for nearly four decades.
• In the case of India and Pakistan, political tensions virtually closed official international trade between them.
Opportunities

• Trade within South Asia can be more than doubled if appropriate regional agreements on roads, rail, air, and shipping are put in place enabling seamless movement.
• The development of effective bilateral and multilateral trade will not only allow an increase in trade but also diversification of the types of goods traded. It will improve export competitiveness by allowing producers in one country to obtain unique, less costly, or better quality inputs from suppliers in neighboring countries.
• Annual trade between India and Pakistan, the bulk of which is routed through Dubai, is currently estimated at US$1 billion, but could be as great as US$9 billion if barriers are lifted.
• Trade liberalization policies, which had begun to be introduced in the second half of the 1980s, were introduced on a more systematic basis in the 1990s. The change contributed to a more rapid expansion of trade of India, Pakistan, Bangladesh, and Nepal not only with the outside world but with one another as well.
• Trade between South Asian countries would likely grow substantially if they were to just open the borders to each other on a genuine Most Favored Nation (MFN) basis.



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