Round Table on Doing Business within SAARC
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On the dais, from left, Mr. Ajay Sahai, Director General, FIEO; H E Dr Sayed Makhdoom Raheen, Ambassador of Afghanistan; H E Mr C R Jayasinghe, High Commissioner of Sri Lanka; Mr. Subhash Mittal, Convenor, FIEO Committee on IT & EP; H E Mr Liaquat Ali Choudhury, High Commissioner of Bangladesh; Dr. R K Dhawan, Chairman, FIEO(NR); Mr. Ahmed Shahid, First Secretary, High Commission of Maldives; and Mr. Thinley Dorji, Dy. Chief of Mission, Embassy of Bhutan. |
FIEO organized a Round Table on ‘Doing Business with SAARC countries’ in New Delhi on 31st May. Senior embassy officials including ambassadors and high commissioners of SAARC countries joined the Round Table and shared their perspectives with exporters on how to increase trade among SAARC member states.
FIEO Convenor on IT & EP Mr. Subhash Mittal while welcoming the dignitaries raised concerns over low volume of internal trade among SAARC members. He said the trade conducted by SAARC members among themselves is less than 5 percent of their total trade whereas for EU and ASEAN the internal trade is more than twenty five percent of their total trade. He identified high cost of trading across the boarders as a major reason for this abysmal internal trade of SAARC despite significant cuts in import tariffs by the member states.
Mr. Mittal also raised concerns over the slow pace of actualization of SAFTA which came into effect more than a year ago. He said tariff and non-tariff barriers to trade continue to exist and member countries are still keen to protect their domestic industries in case of certain products such as agricultural commodities, textiles, package foods etc. "It is estimated that trade between India and Pakistan could reach as high as US dollar 9 billion if the trade barriers were removed and similarly if markets were opened then Bangladesh could increase its export of leather goods and ceramics to India. The loss to industry and consumers in general on account of these trade barriers is considerable. By some estimates, illegal trade or informal exchange of commodities and products is growing on account of restrictive trade practices in these regions." Mr. Mittal added.
Meanwhile, Mr. Mittal expressed optimism that despite all the intra-region trade could increase to US dollar 20 billion in the year 2010 and hailed the unilateral trade concessions announced by India at a recently held SAARC Summit in New Delhi.
On inclusion of Afghanistan in SAARC family which has been welcome by all the members, Mr. Mittal said, it is estimated to add 2 billion US dollar to the sub-continental trade. Afghanistan offers promising opportunities in construction including infrastructure, construction material, agri business and food processing carpet and textiles, as well as logistic activities, he added.
Northern Region Chairman of FIEO Dr. R.K Dhawan identified weak infrastructure as another major reason behind low internal trade of SAARC and cited the example of how exporting to or importing from Bangladesh took ten to fifteen days at Petrople. Talking about Asian Currency Union (ACU), he said, it is time now, particularly for India, when the dollar is creating havoc, to trade in rupee or in any local currency.
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Standing from left are Mr. Ajay Sahai; H E Dr Sayed Makhdoom Raheen; H E Mr C R Jayasinghe; Mr. Subhash Mittal; H E Mr Liaquat Ali Choudhury; Dr. R K Dhawan; Mr. Ahmed Shahid; Mr. O P Garg and Mr. Pravin Saraf, Member, FIEO Managing Committee. |
Dr. Dhawan requested the representatives of SAARC countries to invest in Indian SEZs and take advantage of tax benefits. He concluded by saying that the SAARC member nations should trade together as one nation.
Ambassador of Afghanistan to India Sayed Makhdoom Raheen introduced his country as the land of opportunity for companies engaged in construction, agricultural, energy and mining. The country is said to be remarkably rich in mineral resources and is the treasure house of around 1400 identified mineral deposits as well as precious and semi-precious stones. The ruling Government of Afghanistan recognizes the role of private sector in the economic growth process and has set up an agency called Afghanistan Investment Support Agency (AISA) to facilitate private foreign investments by reducing red tape and streamlining the registering process. The Ambassador informed that around 7000 private companies had already registered through AISA of which 900 are foreign companies. He invited investors and traders to take first mover advantage in his country. "Afghanistan offers tremendous opportunity in most of the areas and is still a virgin territory for many services," the Ambassador remarked.
Mr. Liaquat Ali Choudhury, the High Commissioner of Bangladesh felt that in spite of remarkable growth in the last few decades and having largest number of workforce, the SAARC region was still in poverty trap. He said we can not achieve the goal of economic prosperity without increasing economic cooperation amongst one another and increasing trade within SAARC region. To make SAFTA successful, he said, we need to have the right spirit to conclude the Agreement of SAFTA and need to provide equal opportunity to all the member countries. He exhorted the businessmen of the region to adopt fair trade practices to avoid disputes, yet he called for putting a dispute settlement mechanism in place to deal with unavoidable disputes.
In the SAARC Summit at Dhaka, it was decided to form SAARC Arbitration Council for dispute settlement among the member countries. The High Commissioner wants it to soon become a reality. He was of the opinion that organizations like FIEO could play the role of a facilitator in such circumstances. He appealed the businessmen not to overplay their problems and present them as if they could not be solved. He suggested Indian exporters to forgo short term interest for long-term benefits.
Sri Lankan High Commissioner Mr. C R Jaysinghe said though unlike most other countries in the SAARC region, our country does not have physical connectivity or a shared land border with India; the two countries are connected strongly by trade ties. According to him, Sri Lanka provides the largest off-take of Indian exports per capita and accounted for 2.15% of India’s total exports during April 2005 to November 2006. In 2006, according to Sri Lankan customs data, the country imported around USD goods worth 1.8 billion from India and exported goods worth a little under USD 500 million. "Sri Lanka is the only South Asian neighbor with whom India has a Free Trade Agreement that works on a "negative list" approach and does not take into account non-tariff barriers. India and Sri Lanka are now working on a Comprehensive Economic Partnership Agreement (CEPA) to build on the progress through the FTA." The High Commissioner said.
Mr. Jaysinghe added that given the geographical location, his country was interested in further liberalization of the existing civil aviation regime. He also informed that Sri Lanka was now exploring avenues for her banks to expand their operations in India and was looking for investing in Indian retail sector.
The High Commissioner further said that Sri Lanka was an attractive venue for Indian investment, both for sale in the domestic market as well as exports. He informed that 70% of the container handling by the Port of Colombo related to transshipment to and from the Indian sub-continent. Calling upon Indian entrepreneurs to set up plants in Sri Lanka, the High Commissioner said, "European Union offers Sri Lanka the tariff concessions of GSP plus, or zero duty entry to EU market. While eligibility for GSP plus calls for meeting domestic value addition criteria, under the regional cumulation scheme extended by the European Commission to SAARC countries, inputs sourced from India combined with processing within Sri Lanka can be counted as one totality to meet the Rules of Origin requirements. Thus there exists a great opportunity for Indian investors to use the provisions of the GSP plus scheme for selling their products to the EU at very competitive rates."
Deputy Chief of Mission of Royal Bhutanese Embassy Mr. Thinley Dorji informed that the development of formal private sector in Bhutan was a recent phenomenon and his Government had passed a number of Acts to protect the interest of the private sector. According to him, Bhutanese Government has introduced custom tariff schedule, reduced custom duties significantly and introduced Foreign Exchange Regulations removing several restrictions on foreign exchange transactions.
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Mr. O P Garg, Immediate Past President, FIEO (first row 2nd from left) making a point. On his right is Mr. Pravin Saraf, Member, FIEO Managing Committee, and at extreme left is Mr. Fernando D Escalona, Minister, Embassy of Argentina. |
Bhutan signed its bilateral trade agreement with India in 1972, which entitles it free trade with India. Bhutan also has a bilateral trade agreement with Bangladesh, which provides preferential treatment on goods traded between the two countries. India is Bhutan’s largest trading partner accounting for 90% of its total trade. In recent years, Thailand has become an important source of import of consumer goods for Bhutan largely due to more competitive prices than India and Bangladesh. Going by the current trends, said Mr. Dorji, it is clear that regional economic growth through trade alone cannot be effective and so the cooperation in the core areas of economy represented by investment and trade in services is essential to overcome limitations of trade in goods due to lack of natural resources.
Mr. Dorji identified a number of opportunities for Indian investors in Bhutan, especially in sectors which are open for FDI, such as, mineral processing, agri processing, forestry and wood based industries, livestock based industry, light industries including electronic industries, engineering & power intensive industries, etc. Sectors in services industry are tourism including hotels, transportation, roads, education, infrastructure, IT, financial services and housing etc. He mentioned that power was the most important natural resource of Bhutan. "Bhutan has the capacity to generate 30,000 MW of power while the currently installed capacity is 1,300 MW only," he said. Indian companies can look for the opportunities in the field of power, natural spring and mineral water and human resource as Bhutan has large English speaking workforce, Mr. Dorjee added.
First Secretary in the High Commission of Maldives Mr. Ahmed Shahid made a presentation about Maldives and opportunities present there. "Maldives has an Open Trade Policy which makes doing business easy. There is no income tax, personal tax, wealth tax, capital tax etc. except bank tax and tourism tax. Maldives imports almost everything as it does not have any natural resources. Singapore is the largest exporter to Maldives while India ranks 4th cornering 10% of Maldives total imports. Maldives maintains a pegged exchange rate with the rufiyaa pegged to the US dollar at mid rate of Rf 12.80 per US dollar. Both residents and non-residents may freely import and export capital through the foreign exchange market. Residents do not require permission to maintain foreign currency accounts either at home or abroad and there is no distinction made between foreign national or non-resident accounts held with the banks operating in Maldives. No prior visa is required to enter Maldives and free visa is granted for 90 days to Indian Nationals." He said.
Mr. Shahid further said that fishery was the most important sector in the country’s economy both in terms of employment and exports. "Frozen Tuna fish contributes 79% of the total fish export volume. Maldives is exporting large quantity of canned, frozen fish to Europe, Japan and other countries. However, Maldives’s trade with India has been lower than the potential mainly due to the existing trade regimes in India as well as the limited nature of trade possible from the Maldives. However, in recent years, bilateral trade between the two sides has been on the rise with more imports flowing from India to Maldives. He added.
Towards the end of the presentations made by the official representatives of SAARC countries, an open discussion ensued. A participant, whose company is undertaking a construction project in Afghanistan, referred to the problems of visa. He said, "As per the existing norms, visa is granted by Afghanistan only for 15 days, which needs to be extended again and again. But as our company is engaged in construction of a dam which is a time consuming project, labour has to be sent for larger period say for 2-3 years. It is difficult to convince them to go for a long contract with a visa for 15 days duration. Further, many of them refuse to go at the last moment even after getting the visa and the whole process needs to be started again for a new candidate." He suggested that Afghanistan should issue visa for longer periods depending on the requirements. He further suggested that for large construction projects visa should be granted for a group of persons (say 50 persons) to the company with a choice to send whoever it wants to send as employees.
Another participant raised the issue of security in Afghanistan which has become as a major concern in the post-war era. For a large number of companies engaged in construction projects security of the employees still remain a major concern and the recent high decibel killing of an Indian transport engineer was cited as an example. Moreover, no insurance company is ready to insure the project or the lives of the employee in this war torn country, he said. It was suggested that the government of India should take up this issue with Kabul and for all Indians going to work in Afghanistan, taking life insurance covers should be made mandatory and the cost should be borne by the employers. It was further suggested that LIC should be instructed to come out with a unique policy for the same.
Being a group of islands, no electric power generation plant can be established in Maldives, said a third participant. Electric power in Maldives is fully dependent on generators. The participant observed that Maldives could be a market for wind power turbines and companies engaged in setting up wind energy power plants could explore opportunities in Maldives.
Some participants raised the issue of payment problems in trade with Bangladesh while some others said Pakistan should allow import of zippers from India.
The Immediate Past President of FIEO, Mr. O. P. Garg came out with an important suggestion to organize every year a mega all-product exhibition of all SAARC members in each country one by one to showcase the might of SAARC to the world. FIEO indicated its willingness to organize the first such exhibition in India.
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FIEO Director General Mr Ajay Sahai while proposing Vote of Thanks said, "As per a study, Intra SAARC trade has the potential to increase from USD 5 billion at present to USD 14 billion by 2013-14. India accounts for more than 76% of the trade and population of SAARC region. It is, therefore, India’s responsibility to assume the role of big brother in the region as in the case of NAFTA which enjoys the fruits of benevolence by US." Mr. Sahai said. |
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A participant raising a point |
