| It is beyond doubt that creation of efficient logistical infrastructure is going to be critical for incentivising trade creation in the SAARC region. SAARC countries should note that other countries in the region such as Thailand and China are investing $2"�3 billion every year in ports, roads, information technology to benefit their exporters of low tariff regimes resulting from the evolving free trade agreement (FTA) regimes. |
| According to a World Bank Report, it takes 45 days to transport a container from Delhi to Dhaka, Bangladesh because the container moves to Tughlakabad, then to Mumbai, India, and Singapore. From Singapore, the container is shipped to Chittagong port, and then to Dhaka. The distance of 2,000 kilometers between Dhaka and Delhi could be covered in two to three days by rail. But this does not happen because India and Bangladesh lack a proper agreement to move container traffic. |
| Informal payments are also common in the region. Studies show that such payments account for 0.25 to 2 per cent of the value of the consignment depending on the nature of the consignment. Reports and interviews suggest that by 2001"�02, Indian customs clearance at Petrapole increased to 24 hours (from one hour), plus speed money (informal payments) doubled, because of incorrect documentation that required fixing at Calcutta. |
| Fruits and Vegetables which are perishables are major exports of countries such as Bhutan and Nepal. Delays resulting from infrastructural bottlenecks coupled with the speed money which is then paid to avoid further delays in order to save these items from perishing on the way, makes these exports further uncompetitive in the region. |
| If SAFTA has to become a trade-creating development-friendly trade agreement, then it is high time that the leadership in the region actually does something about its infrastructure rather than only speaking about it in seminars and summits. Industries in the South Asian region will be amazed to note that since the 1980s, the proportion of company revenues spent on logistics in Europe declined from 14.6 per cent to around six per cent. The big difference resulted due to the concerted effort of governments in the region to invest in their infrastructure. Importantly, these governments with the help of their chambers of commerce invested in educating their exporters and customs officials in the area of trade facilitation while embarking into ambitious tariff reductions. |
| We have done the opposite. We have actually placed the cart before the horse. Without actually reducing the porous nature of our borders and without investing into changing of mindsets of exporters and officials in the region, we have jumped into reducing duties on goods in the region. It's time that the SAARC Chambers of Commerce and Industry starts investing its energies into holding seminars with local business organisations on resolving practical issues pertaining to trade across borders. Holding seminars and conclaves for those who have an established presence in the region shall only concentrate the benefits of trade in the hands of the few. At least this is not what SAFTA was created for? |
| The author is a chief economist at Economic Laws Practice, Advocates & Solicitors |
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