India tries to promote trade among South Asian states

India tries to promote trade among South Asian states

Weary of the reputation it has earned of being a regional bully, India is trying to change its big brother image by promoting trade. Mahesh Uniyal of Inter Press Service reports.

NEW DELHI: Dwarfed by India's sheer physical, economic and military size, its subcontinental neighbors have always loved to hate big brother.

Fears of being dominated politically and being swamped by the giant Indian economy are stalling a decade-old regional cooperation effort which aims to raise living standards in Asia's most impoverished region.

The combined external trade of the five big South Asian nations -- Bangladesh, India, Nepal, Pakistan and Sri Lanka -- is less than that of Thailand or Malaysia and less than half that of South Korea.

But they still have not been able to hammer out a mutually beneficial regional economic grouping that could boost South Asian exports.

India's position is especially tricky because as the regional heavyweight it does not want to be as seen pushing through a tariff-free South Asian Preferential Trade Arrangement (SAPTA) to its advantage.

Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka have already agreed to work towards privileged mutual trade, but the two-year-old SAPTA is bogged down in procedural formalities.

New Delhi, however, has seized on interest shown by neighbors to offer trade concessions ahead of a regional cooperation summit in the Indian capital early next month.

India slashed import tariffs on a range of Sri Lankan exports early April soon after a visit by President Chandrika Kumaratunga. New Delhi said it will not insist on reciprocity from Colombo.

The Indian Commerce Ministry has also finalized a list of Bangladeshi products eligible for reduced import levies to be announced shortly.

And recently, India offered extra trade transit ports to the landlocked Himalayan kingdom of Nepal during the visit of its premier Manmohan Adhikary. Nepal depends on Indian ports for most of its trade.

The two sides also set up a joint governmental panel to speed up preferential access of Nepali goods to India and to identify Nepali products on which tariffs can be further lowered.

Both Sri Lanka's Kumaratunga and Nepal's Adhikary were in New Delhi on their first bilateral visits after being elected to office last year.

"We believe that our gesture to Sri Lanka will quicken the pace of negotiations to bring SAPTA into effect," said Indian Commerce Minister P. Chidambaram after announcing the concessions as part of his government's new foreign trade policy.

The concessions to Sri Lanka were extended on Colombo's request and after Kumaratunga offered an Indo-Sri Lankan Free Trade Agreement (ISFTA) during her visit. The tariff cuts on Sri Lankan imports into India will help correct Sri Lanka's current US$ 382 million trade deficit with the country.

Diplomatic observers say Sri Lanka's proposal will be a shot in the arm to boost efforts towards a South Asian trade bloc which are being mainly thwarted by Indo-Pakistan hostility.

Nepal, Bangladesh and Bhutan have also shown interest in becoming part of a non-SAPTA trade arrangement.

"Such an arrangement would bypass Pakistan's deliberate lack of cooperation on the idea of SAPTA because of its obsession with bilateral disputes between India and itself, notably over Kashmir," says leading analyst A.S. Abraham.

"It is particularly significant that the idea for ISFTA, which could eventually lead to SAPTA, should come not from India, but from Sri Lanka. That should contribute greatly to allaying the suspicions neighboring countries may have had if India had proposed such an arrangement," he adds.

India is also paying attention to small neighbors like the Maldives to its south. Indian Prime Minister P.V. Narasimha Rao paid a surprise visit to the Maldives last month and agreed on joint patrols by the Indian and Maldivian navies to stop poaching by foreign fishing trawlers.

The prospects for South Asian cooperation depend largely on New Delhi's relations with its neighbors which range from hostile to wary.

The Indo-Pakistan dispute on Kashmir is the biggest stumbling block. India's only Moslem majority province, Kashmir's accession to India soon after independence from colonial British rule in 1947, is questioned by Islamabad.

A long-standing river water sharing dispute with Bangladesh and the ethnic Tamil insurgency in Sri Lanka have soured New Delhi's ties with Dhaka and Colombo in recent years.

Nepal has long complained of New Delhi's reluctance to update a 40-year-old friendship treaty which Kathmandu thinks is unfair. The demand was taken up by Adhikary with his hosts last month, but the two sides agreed to put this aside for the time being.

The simmering friction is evident in the progress towards lowering regional trade barriers. At a meeting of a SAPTA inter- governmental panel late March in Islamabad, the hosts submitted an exhaustive list of commodities to be considered for tariff reduction, making a decision difficult.

Regional trade cooperation is necessary to enable South Asia to slash its trade deficit and take advantage of liberalized world trade, say business analysts.

By skirting tricky political issues and concentrating more on trade, India, Nepal, Sri Lanka and Bangladesh have taken the first tentative steps to regional cooperation. If Pakistan and India could also set aside their political wranglings in the interests of trade, there might be hope for SAPTA.

-- IPS