Lankan DoC calls for speedier exporter action to grab world’s largest regional market
Saturday, 31 August 2013 00:00
“Phone us immediately!” – Fernando, Lanka’s DG Commerce
Lanka’s exports to rest of SAARC jump by 36%
Increase SAARC visas, introduce a SAARC mobile SIM: SAARC Chamber
350+ SAARC products are high-complementarity, costing region $ 2 b annually: SAFTA in Colombo
If 350+ products brought from outside imported from SA, regional trade growth up by 20%
Proven int’l trade models have not worked in South Asia: SAARC Chamber
As SAARC’s GDP growth is now projected at 5%, intraregional trade growth becomes a key driver in the region’s GDP. In the same vein, trade barriers and lack of prompt action on such barriers can equally ensure trade setbacks.
“The success of a bilateral or regional free trade agreement is measured by the volume of trade it creates. If a long list of concessions has generated only a nominal volume of trade, it has to be reviewed for improvement. Non-tariff barriers usually limit reaping of the full benefits of an FTA. In fact, it is the responsibility of our exporters to report all such barriers – I repeat, all such barriers – to our Department of Commerce immediately for corrective measures since we too are always on priority standby for them. Such immediate action can help considerably improve our powerful FTAs with longstanding trade-partners,” said P.D. Fernando, Director General of Commerce of Sri Lanka.
Fernando was addressing the eighth SAARC Committee of Experts (8SCOE) held in Colombo on 21-22 August as the Chairman of the two-day sessions. The 8SCOE was the essential and critical precursor to the successfully concluded seventh SAARC Ministerial Committee meeting on 23 August in Colombo.
During the Colombo SCOE sessions, for the first time in SAARC’s history, representatives of the private sector facilitated by the Department of Commerce of Sri Lanka actively took part in formulating future SAARC trade directions, giving their inputs. Top commerce officials with powers to decide on their national trade policies from Sri Lanka, India, Pakistan, Bhutan, Maldives, Nepal and Bangladesh, and officials of the SAARC Chamber of Commerce and Industry sat together in a two-day marathon session of in-depth deliberations.
SAFTA trade break down
Presently, total trade under SAFTA stands at $ 2.4 billion. The surging SAFTA market has a huge consumer headcount at 1.6 billion and therefore is ‘highly promising’. In fact, SAARC’s grouping of its eight member states is the biggest of any regional organisation in the world consisting of 23% of world population and therefore is world’s biggest regional economic grouping.
With India’s new push to increase SAARC trade to $ 40 billion by 2015 and recent developments in Indo-Pakistan trade expansion, the vision of SAARC Economic Union by 2020 has gained new impetus. Chief amongst the markets within SAFTA are India (world’s second most populous nation, 192 million estimated households), Pakistan (world’s sixth most populous nation and second urbanised country in South Asia, with 28 million estimated households), and Bangladesh (world’s eighth most populous nation with 34 million estimated households).
As a result of equipping the region with new ports, airports and logistic facilities during the last decade, SAFTA shows potential to be an emergent Asian corridor. Sri Lanka’s exports to the rest of the SAARC region have been on a steady climb. According to the EDB, the total exports to rest of the SAARC from Sri Lanka in 2008 stood at $ 561 million and it increased by a considerable 36% by 2012 to $ 764 million. In 2012, Lanka’s top four export products to the rest of the SAARC were animal feed (8.17% of total SAARC exports), woven fabrics (7.03%), insulated wires and cables (5.53%), and pepper (5.48%).
Officials from SAARC member countries present at SCOE readily agreed with Fernando’s statement and the SCOE’s Colombo deliberations thereafter continued on the broad directions outlined by Fernando who is a veteran trade practitioner with 34 of experience in international trade, serving for Sri Lanka in such key stations as Karachi, Tokyo, Bonn, Brussels, Dubai and Sydney.
“We, the Sri Lanka delegation, propose two new items on dispute settlement and trade facilitation. During our Committee of Experts’ sessions here, we are also evaluating the progress of the Tariff Liberalisation Program (TLP), the status of reduction of sensitive lists under phase II of the SAFTA, progress on the SATIS agreement, and issued related to the least developed countries of SAARC. I draw the attention of the members to the need of the SAFTA Committee of Experts to examine the progress of particularly the TLP, reduction of sensitive lists, including a number of proposals by the working groups, and progress under SATIS. I also note that a number of issues are to be discussed relating to the considerations of LDCs under SAFTA,” said Commerce Fernando.
Problems in South Asia
Muhammad Iqbal Tabish, Secretary General of SAARC CCI, who made a detailed presentation on SAFTA trade based on SAARC CCI’s views, said: “In conducting trade, such well known models as the ‘Absolute and comparative advantage trade theory’, ‘Hecksher-Ohlin Model’ (factors endowment theory), ‘New Trade Theory’, and ‘Tinbergen’s Gravity Model of Trade’ have experienced success in other regions like ASEAN and COMESA. Then what is wrong with South Asia?” Tabish asked.
Tabir continued: “Among the problems in South Asia are incidence of less complementarities, bi-laterals serving as a parallel mechanism to SAFTA instead of complementing it (for example, visas liberal on bilateral, complex at regional level), transformation of tariff barriers into non-tariff barriers, regulatory role of government instead of facilitators leading to protectionisms, slow implementation of policies due to less priority towards South Asian affairs, disconnect amongst SAARC affiliated agencies, inadequate trade facilitation measures (TFMs) which is unfavourable for intra-SAARC economic cooperation, poor connectivity and under-developed infrastructure, low level of private sector participation in policy-making level, absence of regional investment treaty and above all, lack of political will.”
He added: “Products with high trade complementarity and intraregional trade potential must be identified by matching those with high import demand in one or more of SAFTA member countries and corresponding export capacity in one or more of SAFTA trading partners. Currently, there are many such products that are exported from some members of the SAARC region to the Rest of the World (RoW) and imported by other SAARC members from RoW at a higher import price or landing costs. A 2012 study, applying this criterion, has identified more than 350 product lines (at six-digit levels) with high trade complementarity from the sensitive lists of SAFTA members.
“If current imports of these products are sourced from within South Asia instead of RoW, SAFTA countries together stand to save a minimum of US$ 2 billion annually on their import bills. This would also increase intraregional trade by at least 20% of its current level. The advantages in enhancing intra-regional trade through such import displacement/re-sourcing are that there would be minimum risk to domestic industries as there exists sufficiently large domestic markets and it is a comparatively easier way to generate a sudden surge in regional trade which would have positive effects on future growth of the region. All SAFTA countries should undertake immediate steps to identify and remove products from their remaining sensitive lists in which they are currently import dependent and in which they have chances of sourcing from SAFTA trading partners at lower costs.”
Visas in SAARC
Discussing visas in SAARC, Tabish said: “Private sector contribution has been acknowledged as the ‘engine of growth’. However, mobility of the engine has been hostage to the complex visa policy and procedures in South Asia. If movement of businessmen is restricted, business will automatically become retarded.”
Visa for South Asian citizens and businessmen in USA and UK is allowed for five years, two years for EU and Schengen states, and it is allowed for three years between Bangladesh and India, and one to two years between India and Pakistan. On arrival visa is available on bilateral basis in Nepal, Bhutan, Maldives and Sri Lanka, he noted.
“It is highly irrational that the visa exemptions sticker policy, particularly for businessmen, has become ‘the most complex’ in terms of procedures and validity period, which has been curtailed to a maximum 90 days instead of one year. SAARC CCI requests that the increase in the number of SAARC Visa Exemption Schemes (i.e. 500 for businessmen of each member country) be taken seriously.”
Rules of origin
Discussing the rules of origin, Tabish said: “With the objective of promoting regional value chains, Rule 9(b) (domestic value content in the exporting contacting state not less than 20% of the FOB) should be further reduced or relaxed as long as aggregate regional value content (after regional cumulation) remains not less than 50% of the FOB value.”
Tabish then suggested: “There are several complains about the conduct of valuation and certifying procedures from many exporters. The SAARC Chamber of Commerce may be included in a consultative process for redress of complaints regarding ROO certification process.”
Non-tariff barrier reforms
Advocating a participatory approach to non-tariff barrier reforms, Tabish said: “For speedy resolution of procedural, infrastructural and policy-related (standards and compliance) barriers, regular consultations with trade/industry bodies on these matters are required. Such inclusive and participatory approach has many advantages by promoting transparency in the reform process, permitting accessibility of primary complainant or victim (businesses) to the complaint resolution system, allowing more information flow, and facilitating cross-fertilisation of ideas. Business and industry associations are in a better position to provide possible solutions to key trade barriers, data on cost of trade and potential benefits of various policy alternatives.”
Discussing the operationalisation of such a participatory approach, Tabish suggested that the following measures ‘are needed immediately’: “SAARC CCI should be given special status and should be assisted to act as the representative body of chambers of commerce from all member states, in recognition of Article 2 of the Constitution of the SAARC CCI. Allow permanent representation of SAARC CCI in SAFTA COE and all relevant bodies constituted on matters of regional trade and commerce.
“SAARC member countries are to assist and encourage important trade industry associations to join SAARC CCI as its associate members in accordance with Article 3(f) of the Constitution of the SAARC CCI. A committee should be formed by the SAFTA Ministerial Council to frame actions for the enhancement of the role of SAARC CCI with immediate effect, and SAARC CCI should be assisted to organise workshops with trade/industry chambers to popularise the use of participatory approach to NTB reforms.”
Improving regional connectivity
Discussing ways to improve regional connectivity, Tabish suggested: “Allowing cellular companies to introduce a unified database of the users of cellular phones would lead to introduction of SAARC SIM that could be operated in all member countries.
Making a single page document equally acceptable as shipment clearance certificate, open sky policy in South Asia to improve air connectivity ensuring direct flights between capitals and other major cities, permission to private airlines to operate in the region, exploring the possibility of establishing a SAARC airline, mutual recognition of certificate to promote harmonised standards and procedures, prompt implementation of multimodal transport systems and improvement of infrastructure for road, rail, sea and air links to facilitate the movement of goods and people across the SAARC region, and finalising and expeditiously implementing the Regional Motor Vehicle Transport Agreement were some of the recommendations he made.
He also included the establishment of electronic documentation and single window clearance at the six most important land custom stations (Petrapole, Raxaul, Jogbani, Sutarkhandi, Chandrabangha and Wagha-Attari Border), fast tracking the establishment of ICPs (Integrated Check Posts) at six most important land custom stations, adoption of the automated system for customs data world system so as to reduce load factor at major custom stations, removal of all product-specific regulatory limitations imposed on transportation through land routes, creation and hosting of a comprehensive SAARC trade information portals by national governments with SAARC trade procedures, available SAARC trade assistance measures, regulations and rules, focus products and sectors, market information and applicable trade regulations of SAARC member countries.
“To harmonise product codes, the SAFTA Ministerial Council should immediately appoint a task force to develop a unified SAARC product code system. On priority, all members should submit a list of their top 10 regional focus products and sub-sectors to the appointed task force. The task force should be entrusted as the appellate authority for complaints related to product code discrepancies for all member states.”