Arjun Bahadur Thapa, Secretary-General, South Asian Association for Regional Cooperation (SAARC): Interview

Interview:  Arjun Bahadur Thapa

What are the most cumbersome barriers in the way of increased intra-SAARC trade volumes?

ARJUN BAHADUR THAPA: Intra-SAARC trade volumes are not as low as generally perceived. For example, India, as the largest market in SAARC, trades substantially within the region. Both Nepal and Bhutan conduct more than 60% of their trade with India, while Sri Lanka and Bangladesh do around 22% each with India. Of course, significant potential remains to be tapped, and there is a general agreement that sensitive lists and tariffs should be brought down further in accordance with the agreed timelines under the South Asian Free Trade Area (SAFTA). We are also discussing the possibility of fast-tracking these timelines and of further liberalisation of the rules of origin under SAFTA. Moreover, we are working to harmonise standards, conformity assessment procedures, and Customs documentation. We are also discussing further liberalisation of the rules of origin under SAFTA.

With the goal of establishing a South Asian Economic Union, SAARC leaders aim to foster greater economic cooperation with a view to market integration. However, we still need more foreign direct investment in the region. The SAARC Agreement on Trade in Services is very promising in this regard, and we are optimistic that member states can come to an agreement in their continued discussions about harmonising banking and financial procedures.

What kind of constraints do SAARC countries face in terms of physical infrastructure?

THAPA: Unfortunately South Asia remains one of the least inter-connected regions in the world. The bulk of trade in SAARC member states takes place through land border stations, pointing to the need to improve the poor state of infrastructure. This currently acts as a structural constraint, contributing to the high cost and low volumes of intra-regional trade in South Asia. Physical barriers include inadequate loop lengths, some missing links of shorter lengths in border areas, a lack of physical infrastructure at interchange points, load restrictions on bridges, a lack of coordination for gauge conversion programmes between railway systems, and capacity constraints in certain parts of the identified corridors. In the context of aviation gateways, major barriers are likely capacity constraints at several gateways for passengers and cargo, as well as in terms of runways, parking areas for aircraft, passenger handling areas and cargo processing facilities.

To what extent do political complexities pose a challenge to stronger trade negotiations?

THAPA: The sensitivities of all SAARC member states should be taken on board to reach a consensus. Given the different developmental levels of member states, this process can appear slow, when it is in fact moving forward and registering results. Indeed, SAARC only embraced economic cooperation in the early 1990s with the establishment of the Committee on Economic Cooperation. However, since then, SAARC has taken far-reaching steps with both the SAFTA and the SAARC Preferential Trading Agreement, while trade liberalisation and facilitation measures have remained priority areas, all contributing to a rise in intra-SAARC trade. With such measures already bringing dividends of economic cooperation, we are increasingly convinced that the political complexities of the region will not pose a challenge when it comes to negotiations around free trade in South Asia.

Smaller in size and scale, how can Sri Lanka best plug into the South Asian subcontinent?

THAPA: Sri Lanka has played an active role in SAARC ever since its inception, and holds the potential to become a regional shipping hub. From the perspective of both naval and aviation, the country is well placed to help improve South Asian connectivity, while tourism will also be a key driver going forward.