INDIA BUSINESS WORLD - APRIL 2007
The Month that was ...

ZERO DUTY FOR LDCS

INDIA on Friday announced zero duty access for least developed countries by 2008 as well as unilateral visa liberalization. The prime minister made this announcement at the opening day of the 14 Saarc summit here.

Mr. Singh in his address at the inaugural session of the summit, which so far has been high on rhetoric but low on content, announced that India would further reduce the sensitive list for the Least Developed Countries (LDCs). Afghanistan, Bangladesh, Bhutan, Maldives and Nepal are all LDC countries but duty free access will impact only Bangladesh and Afghanistan as India has bilateral trade arrangements giving similar benefits to other LDCs. ``There is an ongoing process of building an open and integrated market from the Himalayas to the Pacific, covering a vast and dynamic economic region,'' said Mr. Singh, and announced unilateral liberalization of visas for students, teachers, professors, journalists and patients from Saarc.

Mr. Singh was clearly attempting to push the Saarc agenda and sending a message to the member states that India was ready to take the lead in implementing concrete measures. He proposed that as an immediate step, all Saarc countries can link their capitals through direct flights and also suggested a South Asian Energy Community for ``harmonizing systems and methods and grid structures.'' The ultimate aim was to move towards energy exchange with energy markets in the region.

Mr. Singh also referred to the political transitions taking place in Bangladesh, Bhutan and Nepal and the economic transitions in the region. ``The political transitions, painful as they may be, are something that each one of us has to work out for ourselves within our countries and between our governments,'' he said, and added that for the first time countries in the region could see ``a future where our people are free of the twin curses of poverty and disease.''

Presidents and prime ministers from all the eight countries were unanimous in acknowledging that Saarc had failed to live up to its potential and that there was a need to push the agenda and move towards implementation. Sri Lanka president Mahinda Rajapakse said, ``I am particularly concerned that Saarc has not realized its enormous potential yet.'' He suggested the member states adopt a single currency which would enhance productivity and improve trade barriers. On Safta, he said, ``We must have a region centric approach to make Safta work in a real sense and give it effective force.''

Pakistan PM Shaukat Aziz also acknowledged that the reason for Saarc lagging behind other regional groupings was political considerations, a point that Afghan president Hamid Karzai made in very strong words. ``The political environment in South Asia has remained vitiated by disputes and mistrust,'' Mr. Aziz said. He proposed a roadmap that included promoting an environment of genuine peace and security in South Asia and removing the ``obstacle of the trust deficit'', clearly pointing to the mistrust between India and Pakistan which has impacted Saarc as a successful regional grouping.

Mr. Karzai, however, was blunter on the need for India and Pakistan to put aside political differences. ``Particular attention should also be directed to landlocked member's transit rights; we must not allow narrowly defined interests to trump the benefits of free-flowing trade in the region. Our collective efforts are required for the successful implementation of Safta.'' Mr. Karzai also talked about the need to speed up the process of the Turkmenistan-Afghanistan-Pakistan-India gas pipeline.

Bangladesh chief advisor Dr Fakhruddin Ahmed also touched on Safta and said that there is a need to pursue trade facilitation measures and remove no tariff barriers. At the same time, he clearly sent a message that larger countries needed to take a larger share of the load. ``Those that are larger and better resourced among us have a greater responsibility to extend support to those lower down the scale of development.''

Nepalese prime minister G P Koirala, who announced that his doctor had advised him against attending the summit for health reasons, spoke for a few minutes only. In his written speech which was made available, he also said that it was time to show concrete benefits to the people of the region. He injected a note of realism and said that despite a galloping economic growth rate, the incidence of poverty in the region was also the highest in the world.

Mr Karzai also said that his country wanted to be a `conduit for g rowing r regional trade'' and that Afghanistan's inclusion would maximize economic benefits. He said that under Safta, the member states will enjoy preferential access to trade and investment in Afghanistan ``Afghanistan's membership will also expedite the North-South transit routes for nations beyond our immediate neighborhood,'' he said and added that Afghanistan's political and economic isolation must not be repeated. Bhutan Prime Minister Lyonpo Khandu Wangchuk also made a strong case for implementation of Safta.