Bangladesh does not expect much short-term benefit from the South Asia Free Trade Area (SAFTA) because non-tariff barriers will stop small countries selling goods to big neighbours, a Bangladeshi business body said on Sunday.
SAFTA, operating under the framework of the South Asian Association for Regional Co-operation (Saarc), became effective on July 1.
"Although we consider SAFTA as a very important step forward to boosting business within the region, it won't be working as we expect," Mir Nasir Hossain, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said.
SAFTA will immediately help the export of goods such as ready-made garments, leather and leather products, jute and jute products, but non-tariff barriers will stop other major Bangladeshi exportable goods from reaching India and Pakistan, Nasir said.
Among the barriers put up are the requirement to obtain certificates from the Indian authorities to show that certain products meet Indian trading standards. Officials said these items, such as garments and shrimps, were exported to the United States or Europe without the need for such paperwork.
Saarc also includes Bhutan, Maldives, Nepal and Sri Lanka. Afghanistan will join the group next year. "SAFTA can work better and we can reap more benefits from the deal only if our big neighbours came with an open mind," Nasir told Reuters.
Bangladesh wants to export fish, vegetables, jute and jute goods, tea, leather, ready-made garments, home textiles, medicine, processed foods, handicrafts and ceramics to other Saarc member countries.
"But due to non-tariff barriers by India, we cannot export those items there," said Commerce Minister Hafizuddin Ahmed.
"The success of the deal largely depends on the decision of political leaders," he told reporters.
Pakistan has also put jute, ready-made garments and leather products on its list of "sensitive items", thus blocking imports.
With a population of 1.4 billion, South Asia has enormous economic potential, Nasir said. Trade within the region amounted to just 4.5 percent of the region's $135 billion annual trade flows, officials said.
In contrast, Nasir noted that intra-European Union trade accounted for 55 percent of its total trade, intra-NAFTA (North American Free Trade Area) trade for 61 percent and trade beween states in the Association of South East Asian Nations (ASEAN) for 25 percent.
The SAFTA agreement, signed in January 2004, was supposed to come into effect from January this year but was deferred because the member countries were not ready.
Under the first phase of the agreement, scheduled to last until December 2007, tariffs are to be reduced in two phases to 20 percent in the case of India, Pakistan and Sri Lanka and 30 percent in the case of Bhutan, Bangladesh, Maldives and Nepal.
Lyonpo Chenkyab Dorji, secretary general of the Saarc secretariat, said in April that the organisation wanted to make the Saarc region a free trade area by 2016.