Report

96 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
collective vision of South Asia of an inter-connected
region where there would be free flow of peoples,
goods, services and ideas (MEA, India 2007).
In view of the importance of the role that services
can play in providing momentum to SAFTA, the study
undertakes an in-depth analysis of trade potential and
restrictions in key services sectors-construction and
related services; higher education services; health
services; telecommunication services and tourism and
travel related services in seven South Asian countries,
namely India, Pakistan, Sri Lanka, Bangladesh, Nepal,
the Maldives, and Bhutan. Six out of seven countries
are already part of the multilateral trading system where
they have made commitments to liberalise these sectors.
Moreover, they are contemplating to further liberalise
these sectors during the ongoing services negotiations.
Bhutan, the only one of the seven countries from the
region, not yet part of the WTO, is also actively
involved in accession negotiation and has submitted
its services offer to undertake commitments in various
services sectors.
In this regard, while the chapter argues that all seven
countries should make liberal commitments under
GATS, they should be willing to undertake more liberal
commitments at the regional level in order to reap the
full benefits of liberalisation. There could be two
specific reasons why these countries should be undertaking
wider and deeper commitments than they would
do under the GATS. First, as the group is small – having
just seven players, as compared to the entire WTO
membership there is higher probability of early harvest
thereby benefiting from the liberalisation. Second, the
real or perceived risk of opening up of the services sector
would be drastically reduced at a regional level as
compared with that at a multilateral level. Further, this
provides an opportunity to the countries to engage in
caliberated liberalisation.
Theoretically speaking, given the asymmetrical
growth of services and services trade between South
Asian countries it would seem that India might gain
most from a regional agreement. However, the study
argues that it is the smaller countries who should be
gaining most from a negotiated agreement. Although
India is already the dominant player at the regional
level, in order to negotiate an agreement, smaller countries
would need to identify their areas of comparative
advantage (this is based on the assumption that as the
market size would be far smaller and they would be
knowing the characteristics of the market better than
that of the entire world’s market that will help them in
nuancing their demand.) and accordingly seek better
market access for their services in bigger countries.
Likewise, in the areas of import interest they can seek
concessions and would eventually gain by the reduction
in import price. For example, in exports they can ensure
meaningful market access for movement of their
workers to countries like India and Pakistan. Similarly,
they seek concessional fees for their students who come
to India to study. They can also ask for concessional
fees for South Asian medical patients when they come
for medical treatment to India. Facilities like visa on
arrival or no visa requirement for a South Asian will
also be a great help. Above all, this forum will enable
them to better articulate the areas of their special
interest which is otherwise relatively cumbersome at a
multilateral level. Finally, as elsewhere, here too the
LDC member countries may benefit from the possible
provisions of special and differential treatment.
Further, it is found that South Asian countries have
a competitive edge in different categories of services.
In transport services, Pakistan and Sri Lanka have competitive
advantage while India has a competitive advantage
in construction services, computer and information
services and other commercial services. Maldives and
Nepal are found to be more competitive in travel
services while Bangladesh has a higher competitive edge
in financial services (Banga 2008). Overall, South Asia’s
trade interests in the services sector are driven by its
factor endowments, with export interests in the area
of labour-intensive and manpower-based services and
import interests in the area of capital and technology
intensive services (Chanda 2005). All the South Asian
countries have strong interest in exporting labourintensive
services, at all levels of skills. The gains would
be huge in areas where the services trade is highly
restricted, such as cross-border movement of labour.
Overall, it appears that construction, education,
tourism and health services are of special significance
both from export as well as import interests.
India
OVERVIEW OF SERVICES: COUNTRY-LEVEL
ANALYSIS
The importance of South Asia in services trade seems
to be largely owing to India’s phenomenal success. In
fact, in recent years the changes in the world economy
brought about by the remarkable growth in the services
sector have been nothing less than spectacular in the
case of India. It has enormously shifted the composition
of India’s GDP in favour of services. The share of the
services sector in India’s GDP has risen rapidly from a