PROBLEMS IN SOUTH ASIAN FREE TRADE AREA (SAFTA)

Countries that form a regional trading arrangement (RTA) are usually heterogeneous, as reflected in their size in terms of geographic area, population as well as gross national output, economic structure as manifested in the composition of goods and services produced and traded, and policy intervention mechanisms in place by way of fiscal, financial and trade-related measures, influencing domestic production and trading activities. These varied characteristics of the members greatly influence their gains from an RTA. The South Asian countries under the South Asian Free Trade Area (SAFTA), vividly portraying their inherent dissimilarities, also point toward a somewhat uncomfortable scenario of unequal distribution of potential gains from the regional cooperation scheme. Whilst all the SAFTA members are low-income developing countries, four of them viz., Bhutan, Bangladesh, Maldives and Nepal are amongst the least developed countries (LDCs) due to a number of overriding problems that constrain their economic growth and development. Consequently, to what extent these problems can effect SAFTA agreement is an important question, which is the principal objective of this paper.