Fiscal and Trade Policy for the SAARC Region Vision 2020

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Fiscal and Trade Policy for the SAARC Region -
Vision 2020 Dr. Anura Ekanayake Deputy Vice
Chairman, The Ceylon Chamber of
Commerce SOUTH ASIAN TAX SUMMIT 2008 April
2008 Karachi, Pakistan
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The only way of discovering the limits of the
possible is to venture a little way past them
into the impossible. - Late Arthur C. Clark,
renowned scientist, S-F writer and a distiguished
citizen of South Asia.
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Fiscal and Trade Policies

• Why do we need them?
• Tools to raise Government revenue
• Influence demand and supply
• Encourage exports
• Stabilize Exchange rate/BOP
• Encourage investments
• Accelerate economic growth
• Create employment
• How are they inter-related?
• Trade policy is very much a part of Fiscal
  policy. It is used to raise/spend government
  revenue
• They strive to contribute to the achievement of
  similar objectives - Growth, Income, and
  Employment

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Current Position of intra-SAARC Trade - Data and
issues in brief.

• Fiscal Policy Situation -
• Despite the differences in the size and
  development of the countries in the region, there
  are some characteristics that seem to stand out
  in terms of fiscal policy
• We seem to be high spenders relative to what we
  earn (high budget deficits and low government
  revenue)
• Our countries experience relatively high rates of
  inflation and high growth
• Poverty is high in our countries and income low

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Some indicators
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SAARC Countries Trade Policy- The Current
Situation

• Trade liberalization started late (late 70s early
  80s) and slow progress
• Tariff barriers are still significantly high
• Protection in agriculture is higher than
  protection in non agriculture
• Non tariff barriers are significant
• Trade facilitation can bring many benefits
  however not much progress has been made
• Intra regional trade is low, however, intra
  regional trade is more important for smaller
  SAARC countries than for larger ones (e.g. Bhutan
  73 of total trade is within SAARC and Nepal 62,
  in contrast for Pakistan intra regional trade is
  only 4 and India 3)

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A Brief Comparison of SAARC with the European
Union and the ASEAN
Source www.aseansec.org , http//europa.eu/ ,
www.saarc-sec.org
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Importance of Trade within SAARC for SAARC Member
Countries - 2005
Source www.trademap.org, Annual Report of the
Central Bank of Sri Lanka
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Tariff Profile of South Asia
Source World Tariff Profiles, 2006 (www.wto.org)
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Potential for growth in South Asia

• Based on Deutcshe Bank Research -
• A forecast by Deutsche Bank Research on 34
  economies indicate that Growth in future will
  come from Asia.
• According to this Study done in March, 2005
• India (5.5), Malaysia (5.4), and China (5.2)
  will post the highest GDP growth rates overall
  during 2006-2020 period
• The growth of India already is and will be a
  major driving force of growth in the SAARC
• Pakistan is the gateway to the middle east and
  Africa
• Yet, are we ready to make use of these
  opportunities?
• All the big businesses around the globe are eying
  to make profits from them
• What are we neighbors doing? Are we hiding behind
  our fears, suspicions and historical hostilities
  and turn a blind eye to this chance of a lifetime?

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How can the Region move Forward?

• Find synergies, Find Win-Win situations
• Look for harmony not for conflict
• There are things we can share and benefit from
• Some examples of such situations
• Cricket World Cup 1996
• Let us share our own backyard for the world to
  play cricket
• Health tourism Combine medical expertise of
  India with hospitality in
• Sri Lanka
• Professional medical care in a home away from
  home
• Trade Combine increased trade of India with
  maritime expertise of
• Sri Lanka
• Let your neighbor deliver your goods to the
  world
• Apparel Combine designing skills of India with
  production technology of
• Sri Lanka
• Together let us dress the world

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How can the Region move forward? (Contd.)

• Improve Connectivity
• We are neighbors, we share borders
• We share culture, language, religion
• Yet, doing business with each other is expensive
  both in terms of time and money
• Saying hello to my neighbor is quite expensive
• Cost of telecommunications
• Visiting to see my neighbors factory is quite
  expensive and time consuming
• Air connectivity
• Sending my goods to my neighbor is quite
  expensive and time consuming
• Air, sea and land connectivity
• Bringing down barriers must be seen as an
  opportunity rather than a threat
• It will help reduce the dependence on few
  outside markets like U.S.A. and E.U.,
• It reduces the vulnerability of being over
  dependent on these markets

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Cost of trading across borders 2006
Source Cost of Doing Business Report World Bank
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Role of the Government

• Role of the Government would be to act as a
  Facilitator
• To
• Facilitate Trade
• Facilitate movement of people
• Improve infrastructure

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Role of the private sector

• Make use of each others strengths to make your
  business a success
• Few thoughts
• Indias Entrepreneurs and Professionals
• Sri Lankas Maritime Expertise and Hospitality
• Labour and Commodities in Bangladesh and Nepal
• Innovative Poverty Alleviation Schemes (for e.g.
  Grameen Bank)
• Maldives Tourism - Sun and the Beaches
• Bhutans pristine Natural Beauty and Gross
  National Happiness
• Pakistan the gateway to the Middle East

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In Conclusion

• The direction of Trade Policy of SAARC in future
  should strive to
• Have lesser direct and indirect trade barriers
  for Intra SAARC trade
• the direction of Fiscal Policy of SAARC should
  strive to
• Invest more on developing infrastructure
• Reducing wasteful recurrent expenditure
• Curtailing budget deficits
• Reducing poverty through growth

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THANK YOU
Appreciation EIU of the Ceylon Chamber of
commerce