A Glass Half Full: The Promise of Regional Trade in South Asia

KARACHI –  A seminar was held at the Institute of Business Administration (IBA) Karachi for the launch of the World Bank’s report titled A Glass Half Full: The Promise of Regional Trade in South Asia. The World Bank’s Lead Economist and Coordinator, South Asia Regional Integration, in the Macroeconomics, Trade and Investment Global Practice, Mr. Sanjay Kathuria gave a presentation on the report followed by a panel discussion. The panel comprised of Mr. Kathuria, Associate Dean IBA and an International Relations Expert, Dr. Huma Baqai and President of Employers’ Federation of Pakistan Mr. Majyd Aziz. The seminar was attended by students, members of faculty, alumni and public.

Mr. Kathuria started the presentation by first asking the audience about their views on the purpose of trade. Later, he observed that the purpose of trade should be to maximize overall welfare of the economy. He stated that South Asia has the most rapidly growing and dynamic market for trade with great potential but unfortunately it is also the most non-cooperative region in the world. South Asian countries have greatly negated the benefits of proximity whereby regional trade constituting only 1% of their combined GDP. Major reasons for this dismal performance are lack of mutual trust, price discrimination, trade barriers in the form of rigid custom procedures and tariffs.

Mr. Kathuria also underlined shortcomings of the South Asian Free Trade Agreement (SAFTA) which undermine negotiations by not bringing Para-Tariffs on the concessionary table. He also highlighted the perceived barriers to trade namely asymmetric information and inadequate capacity to ensure and certify for export quality standards, as well as the real barriers namely unaccommodating border infrastructure, limited entry and exit points, custom restrictions and absence of means of electronic data exchange.

To improve regional integration, Mr. Kathuria suggested greater land and air connectivity and border markets to improve cross border relations and trust development. Instead of political situations determining trade, it must be trade that should be leading politics.

Later, Mr. Aziz commented that trade between India and Pakistan can be improved through establishment of formal economic zones, signing a charter of trade focusing on removal of trade barriers and initiating confidence building measures. He stressed that expansion of Indo-Pak trade can be a real game changer.

Dr. Baqai observed that the major responsibility for improving regional trade in South Asia lies with India, by being the largest regional market accounting for 80% of regional trade. She stressed that India must initiate trade negotiations and Pakistan must reciprocate as it has no option but to opt for greater economic integration to improve its economic condition.

The seminar was concluded by Mr. Kathuria by restating his vision for a direct trade route from Kabul to Dhaka.