SAARC Conference on ‘Promotion of Trade and Economic Cooperation' 1100 hrs. 14 March 2007 , Dhaka
1. President of MCCI, Mr. Latifur Rahman, Gen. Shamsher Mehta, DG, CII, distinguished members of MCCI and CII, friends from fellow SAARC countries, ladies and gentlemen.
2. I would like to thank the MCCI and the CII for organizing this Conference and permitting me to speak at this forum.
3. May I also compliment the organizers on choosing an apt theme for discussion, since promotion of Trade and Economic cooperation is the key to unlocking our collective vision of SAARC. Indeed, the questions (themes for the two sessions) “How close are we to SAFTA”? and “How do we share growth and strengthen economic cooperation?” are critical to making SAARC meaningful and helping it transform from a declaratory phase to an implementation phase.
4. In today's globalized world, trade and business have breached national borders, making them increasingly irrelevant. In Asia and elsewhere, countries are effectively harnessing the immense power of regional trade and investment to face the challenges of globalization. It is telling that we in South Asia , home to the largest number of the world's poor, are still talking about Promotion of Trade and Economic Cooperation in the SAARC region. While regional entities like ASEAN have forged ahead and regional cooperation has become a part of the political and economic landscape all around us, we continue to lag behind.
5. And yet, as Prime Minister Manmohan Singh reminded us at the SAARC Summit in Dhaka last year, South Asia is uniquely poised at the center of a dynamic economic region and could realize its latent potential by becoming a key component of the larger Asian resurgence. Today, the economic balance is definitely and decisively shifting to Asia . Half of the growth in world output is now generated in Asia . In global finance, Asia now funds almost the entire current account deficit of the rest of the world. ASEAN is evolving rapidly into a truly integrated economic community. Parallel to this intra-ASEAN integration is the broader movement towards East Asian economic integration including Japan , China and Republic of Korea . This may herald an eventual free trade area in Asia , covering all major Asian economies and possibly extending up to Australia and New Zealand . This Pan-Asian Free Trade Area could well be the third pole of the world economy after the European Union and NAFTA. If we cannot think big we will remain small.
6. If South Asia wishes to be a part of this dynamic Asian resurgence, we must act speedily. If SAARC as a region seeks to recapture its role as a crossroad for culture and commerce, we need to remove the barriers to the free flow of goods, investment, services and people within our own region first. India has been stressing the need to improve connectivity within our region and between us collectively and the larger Asian neighbourhood. As Prime Minister Manmohan Singh has said, and I quote: “We need to recharge and regenerate the arteries of transport and communication that bind us together and in turn link our region to the rest of Asia to reclaim the prosperity that is undoubtedly our due”. Such connectivity is based on the inescapable logic of history and geography. It was in this context that India offered to hold a South Asian Car Rally, as a run-up to the next Summit – to symbolize the inter-connectedness of the SAARC region and highlight the urgent need to improve our road connectivity and transport infrastructure. We are indeed grateful to all SAARC Member countries, especially Bangladesh as the current chair, for having made the proposal of the South Asian car rally, a reality.
7. The car rally would have served its purpose if we begin by acknowledging the fact that road, rail and waterway links that once connected the different sub-regions of South Asia , remain inadequate. So while SAFTA marks an important milestone of success for SAARC and holds the potential to push the current low level of SAARC intra-regional trade, beyond the present meagre figure of 5% of SAARC's total foreign trade, its full benefits will be realized only if SAARC members are able to restore the long severed transport and communication linkages among member countries.
8. Not surprisingly, in the absence of improved connectivity and transit, intra-SAARC relations actually suffer and face degradation in the economic sphere. For instance, if we take the case of India-Bangladesh connectivity, we all know the difficulties faced by our exporters a importers at Land Customs Stations like Benapole/Petrapole and by individual citizens wanting to cross over on holiday or for medical treatment or for business. We have all heard detailed descriptions of the so-called para-tariff and non-tariff barriers that are preventing enhanced trade and economic cooperation between our countries.
9. What we do not normally hear is the fact that the vast majority of these so-called para-tariff or non-tariff barriers would disappear, if we were to accept the logic of improved connectivity. For instance, if seamless containerized cargo train services were allowed between destinations in Bangladesh and India, the hundreds of trucks waiting on either side at our major Land Customs Stations to cross over, together with all the attendant complications of multiple checking, multiple weighing and interminable delays would disappear. Such containerized cargo train services are the norm in the European Union, ASEAN and many other parts of the world. The same argument holds true for riverine connectivity for developing containerized cargo services on barges. We have not utilized these natural advantages.
10. It is, therefore, imperative that we move from reflecting on the desirability of connectivity to implementing the width and breadth of connectivity.
11. Against this background, we are happy to note that both India and Bangladesh have agreed to commence the much-needed passenger train service between Sealdah and Joydebpur. We hope that this will facilitate smoother cross border travel. The Government of Bangladesh, during the recent visit of External Affairs Minister Pranab Mukherjee to Dhaka on 19 th February 2007 , has also conveyed its concurrence to the construction of a much-needed 20-meter bridge over river Raghnacherra in Tripura on the Indian side of the Botuli–Old Raghna Bazaar Land Customs Station to facilitate cross-border trade. We applaud and welcome these decisions.
12. We need many more similar breakthroughs in all aspects of our bilateral ties.
13. If we are to realize our vision of a ‘strategic partnership for prosperity' that Prime Minister Manmohan Singh talked about at the last SAARC Summit, where the benefits of economic growth and national competencies are shared, it is imperative that we urgently focus on some of the following key issues:
(i) Intra-regional multi-modal connectivity : (a) Necessary infrastructure for greater road, rail, riverine and air connectivity and opening of more trade routes. India has offered, on a reciprocal basis, an ‘open skies' regime to greatly expand airline connectivity within our region. (b) Provide reciprocally to each other transit facilities to third countries, which will link us to each other and beyond to the thriving economies of South East and East Asia as also the vast energy markets of West Asia and Central Asia . On its part, India has agreed to reciprocally provide to each of its SAARC neighbours, transit facilities to third countries. (c) Liberalization of visa regimes to facilitate commerce and people-to-people interaction. India has already agreed to increase the number of SAARC visas issued to leading businessmen of the member states.
(ii) SAFTA : SAFTA has entered into force from January 2006 and marks an important milestone on the road to a South Asian Economic Union. Successful implementation of SAFTA in letter and spirit by all Member States, will act as a catalyst in other areas of economic integration and benefit smaller countries, the most. SAFTA was negotiated over a period of four years with complicated and difficult negotiations on the respective sensitive lists. Singling out one country for imposition of additional conditionalities that were neither agreed nor negotiated by member countries amounts to a derogation of the Agreement and is a violation of Article 23 of SAFTA. It jeopardizes the implementation of the Agreement and affects all contracting parties. It also contradicts the commitments made by the leaders at the 13 th SAARC Summit. We hope that this issue would be resolved at the earliest so that SAFTA is implemented in the spirit it was negotiated, with all parties abiding by the contractual obligations they have solemnly undertaken.
(iii) Trade Facilitation Measures : As I said before, SAFTA has little meaning without improved trade facilitation and smooth movement of goods through greater harmonization in customs evaluation, simplification of procedure for movement of goods across borders, containerization of trade etc. In this regard, the 3 major agreements signed at the 13 th SAARC Summit on cooperation in customs matters, taxation and arbitration issues are important landmarks. India has ratified all 3 Agreements and hopes that other countries that have not already done so would ratify them. Establishment of a SAARC Arbitration Council and Investment Promotion would contribute meaningfully to further economic integration in the region. We also need greater coordination and synchronization in the development of Land Ports and Land Customs Stations in the region.
(iv) Intra-regional investment and Trade in Services : This is a very valid point, especially in this forum. India has been stressing greater intra-regional investment. Our businessmen must give priority to private sector cooperation in areas such as power generation, research and development in science and technology and services like healthcare, education, Information Technology and Insurance. In fact, in addition to widening the scope of trade in goods, we now need to expand the ambit of SAFTA to include trade in services to make SAFTA an effective vehicle for growth and regional integration. India had proposed a South Asian Energy Dialogue at the last summit in Dhaka . We are happy to say that the Dialogue was held two weeks ago in New Delhi . The anachronistic ban on investments from Bangladesh to India has to be removed and I hope this will be done shortly.
14. SAARC High Economic Council : At the July 2005 SAARC Ministerial Meeting, we had recommended the establishment of a SAARC High Economic Council, which could promote economic, trade, finance and monetary institutions with the objective of regional economic integration. It would perhaps be worthwhile to set up such a Council, tasked exclusively with the aim of promoting trade and economic integration in the region.
15. Ladies & Gentlemen, as you might be aware, the Indian economy is growing at an annual rate of 8-9%. We hope to raise it to around 10%. Our optimism is based on the fact that our savings rate is now over 29% of GDP and the investment rate is about 31% of GDP. With a growing young population and our economy becoming more hospitable to foreign direct investment, we expect to grow further. As per the latest figures, India saw a six-fold increase in FDI in December 2006 over the previous year, from 350 million dollars to 2.04 billion dollars. The mobile phone market is growing at 6 million per month and automobile sales at 24% per annum. We will reach 200 million phones shortly and will become a USD 1 Trillion economy in 2007-08. India is a vibrant marketplace, a productive and profitable business destination. Economic activity cannot be confined within national borders alone, it must be channeled to fuel growth in each other's countries for a prosperous and stable neighbourhood. India is keen on forging a web of partnerships with the countries of the region through free trade and economic cooperation agreements through SAFTA and FTAs with Singapore , Thailand and ASEAN. We are working on similar arrangements with Japan , China and Korea .
16. India accepts that as the largest country in the South Asia region with the strongest economy, India has a greater responsibility in developing bilateral relationship with our neighbours. In this context, India has readily accepted the principles of non-reciprocity and positive asymmetry. As the larger economy, we are prepared to give much more than we can ever hope to get. This has been amply demonstrated through the free markets that India has already established with Sri Lanka , Nepal and Bhutan , in the bilateral FT that we have offered to Bangladesh and SAFTA with SAARC. India is aware that its own peace and prosperity is inextricably linked with that of its neighbours. We are as committed to our own sustained economic development and welfare of our people as we are to partnering our neighbours on a mutually agreed basis in their economic development.
17. In this spirit, we are happy to note that Bangladeshi exports to India have increased by nearly 400% in the last five years and that India is the largest destination for exports from Bangladesh amongst countries outside the Western world. With the coming into effect of SAFTA, exports to India would further rise. The decision to allow duty free import of 8 million pieces of garments per year and recognition of a private international testing laboratory ‘Bureau Veritas' in Bangladesh for certification of Textiles and Garments is also expected to increase Bangladeshi exports to India. We also expect Bangladeshi exporters to derive advantage of the recent reduction of import duty on cement from 12.5% to 0%.
18. Ladies & Gentlemen, the time has to overcome the divisions of history and politics and to forge a new architecture of mutually beneficial economic partnerships. India , on its part, is resolved to build on the ancient commercial and civilizational linkages that bind our region and strengthen the basis for our region-wide partnership for prosperity. India has the privilege of hosting the 14 th SAARC Summit next month. We look forward to building on all that we achieved at Dhaka and taking SAARC a step closer to our cherished vision of a prosperous, stable and vibrant South Asia .
Thank you very much.
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March 14, 2007 .