Trade Facilitation and Regional Integration in South Asia

Mukesh Kumar1
Provincial Chief,(Sindh)
Small and Medium Enterprises Development Authority
Email: mkumar@smeda.org.pk
Contact: 0300 2170441

Azeema Begam2
(Corresponding Author)
Ph.D. Scholar
Department of Economics, University of Karachi
Email: azeemausman@hotmail.com
Contact: 03492041156

Nargis3
M.Phil Scholar
Department of Economics, University of Karachi
Email: nargismalik866@gmail.com
Contact: 03132725052

Abstract

Linking regional integration through trade facilitation is a significant tool to analyze the trade
potential of an economy or region. Unlike other regions of the world, this link is feeble in South
Asia due to constant defensive disputes and divergent strategic interests while other successful
developing economies have advocated liberal trade regimes. Despite of SAFTA; the South Asian
countries have not shown favorable results in promoting trade and economic development
over the last few years. In this regard, this region highly requires adopting trade facilitation
measures in order to reduce trade costs and to achieve more economic competitiveness.

More than one-fifth population of world’s population are living in South Asia however; it is
considered as least economically integrated regions in the world whereas; global trade share is
only 3 percent and intra-regional trade accounts for less than 6 percent of its total trade. It has
been said the political hostility is the main factor behind low- integration between SAARC
countries as two largest countries, namely Pakistan and India have unstable political relation
since independence which is hampering trade flows.

It is also an interesting fact that inter-regional trade is missing many countries like Afghanistan
and Nepal, Maldives and Afghanistan and Pakistan and Bhutan etc. Moreover; the average
trade cost is 20 percent in South Asia which is also very high. Moreover; proper infrastructure
and logistic, and customs are major factors that determine cross-border trade flow. In South
Asia; poor infrastructure and high tariff and non-tariff rate are also contributing to the low
amount o intra-regional trade in South Asia.

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The high levels of trade protection in the region, infrastructure deficiency and institutional
inefficiency are the main obstacles that have undermined the regional integration in the region.
There is need to be ensured trade facilitations such as visa sticker, removing tariff and non tariff
barriers and improving infrastructures for enhancing regional trade between SAARC countries.
Furthermore; trade facilitation should be linked to investments in transport infrastructure,
information and communications technologies and broader trade-supporting services.
Moreover; there is need to build more confidence while minimizing trust deficit between
member countries which may improve economic interest and increase possibility of trade
throughout the South Asian Countries.

Keywords: Regional integration, trade facilitation, Diagnostic approach, South Asia

Objective of the study

The main objective of the study is to highlight the potential benefits of trade facilitation while
developing a framework for regional integration in South Asia. The study performs a
comprehensive data analysis of various indicators to identify the trade potential for SAARC in
view of regional integration and trade facilitation. Moreover; this study also analyzes tariff and
non-tariff measures contained in regional trade agreements currently in force in South Asia and
identifies the prevailing bottlenecks in restricting regional integration that may tend to crowd
out the potential benefits of trade.

Research Question

 Q1: What are the potential benefits of trade facilitation for regional integration?
 Q2: How can regional integration improve through improving trade facilitation and
reducing trade barriers?
 Q3: What are the major impediments and challenges that are restricting regional
integration in South Asia?

Methodology

This study adopts a “Diagnostic approach” which develops a better understanding of the
factors that strengthen regional economic integration through trade and regional and bilateral
arrangements. Based on secondary data from published journals, reports and website; this The
qualitative study performs a comprehensive analysis to identify those aspects which can
facilitate and improve trade flow through port reform, modernization, streamline regulatory
requirements, balancing standards and customs regimes in South Asia.

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Outline of the Paper

Introduction/Background of the study

Objective/ Research Questions
Existing Literature on Trade facilitation and regional trade focusing South Asia.
Overview and Benefits of Trade facilitation
Issue, Problems, concerns and bottleneck
Role of Trade Facilitation in South Asian Economic Integration
Conclusion and Policy Recommendations