Report

More documents

Recommendations

Info

xvi QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA the revenues of the government in these countries. Using software for market analysis and restrictions on trade (SMART) simulations, i.e. partial equilibrium analysis, the study estimates the impact on welfare, trade and revenue on each of the SAFTA member countries. The country-wise results show the following: Bangladesh Revenue loss to Bangladesh is estimated to be about $0.9 billion on the basis of SMART simulation while it is $0.5 billion on the basis of weighted average tariff and $0.23 billion in case of simple average. There are welfare gains for Bangladesh and other South Asian Association for Regional Cooperation (SAARC) countries from 100% tariff reduction by Bangladesh. Bangladesh creates trade of approximately $0.27 billion. Bhutan Revenue loss to Bhutan is about $7.3 million on the basis of SMART simulation while it is also approximately $2.3 and $2.6 million on the basis of simple and weighted average tariff. There are welfare gains for Bhutan and other SAARC countries from the 100% tariff reduction by Bhutan. Due to this reduction, trade increases by approximately $17 million. India Revenue loss to India is about $0.12 billion on the basis of SMART simulation while it is also approximately $0.1 billion on the basis of simple and weighted average tariff. Results are consistent in both the approaches. There are welfare gains for India and other countries from 100% tariff reduction by India. In India, trade increases by approximately $0.7 billion. The Maldives Revenue loss to Maldives is about $0.016 billion on the basis of SMART simulation while it is also approximately $0.026 and $0.023 billion on the basis of simple and weighted average tariff. There are welfare gains for Maldives and other SAARC countries from the 100% tariff reduction by Maldives. In case of Maldives, trade increases by approximately $0.026 billion. Nepal Revenue loss to Nepal is about $0.053 billion on the basis of SMART simulation while it is also approximately $0.1 billion on the basis of simple and weighted average tariff. There are welfare gains for Nepal and other SAARC countries from the 100% tariff reduction by Nepal. For Nepal, trade increases by approximately $0.012 billion. Pakistan Revenue loss to Pakistan is about $0.055 billion on the basis of SMART simulation while it is $0.085 and $0.052 billion on the basis of simple and weighted average tariff. There are welfare gains for Pakistan and other SAARC countries from the 100% tariff reduction by Pakistan. For Pakistan trade increases approximately $0.11 billion. Sri Lanka Revenue loss to Sri Lanka is about $0.1 billion on the basis of SMART simulation while it is $0.12 and $0.11 billion on the basis of simple and weighted average tariff. There are welfare gains for Sri Lanka and other SAARC countries from the 100% tariff reduction by Sri Lanka. For Sri Lanka it trade increases approximately $0.17 billion. Impact of SAFTA on inward Foreign Direct Investment The impact of deepening of SAFTA by including investment and services cooperation has been examined. FDI flows into the region are argued to be positively influenced by regional cooperation. This happens due to several reasons. Greater regional cooperation lowers the risk of investments; foreign investors can choose least cost investment location and cater to a larger market due to low tariff barriers; there is better opportunity to increase the extent of product fragmentation to the investors which may induce vertically integrated FDI in the region. The study undertakes panel data estimations for seven member countries of SAFTA considered over the period 1980 to 2006. The impact of intra-regional tariffs and intraregional trade on inward FDI flows is estimated after controlling other determinants of FDI. The results show that the economic fundamentals of a SAFTA member country have a significant impact on the inward FDI. Domestic market size, low cost of labour and availability of skills attract FDIs from outside the region. Higher trade openness also attracts higher FDI. Tariffs with respect to other SAFTA member countries has a negative impact which indicates that lowering of tariffs following SAFTA will attract FDI from outside the region into the region. The coefficient
EXECUTIVE SUMMARY xvii indicates that the impact will be significant, i.e. 30% of the rise in inward FDI may be because of lowering of intra-regional tariffs. This indicates that SAFTA may encourage FDI inflows into member countries and consequently into the region as a whole. To assess whether SAFTA will encourage vertical FDI, the impact of the share of SAFTA member countries in imports of intermediate goods on inward FDI is examined. The results show that the imports of intermediate goods in the host country have a significant impact on the inward FDI. In other words, higher the probability of importing intermediate goods into the host country more attractive will be the destination for inward FDI. SAFTA may therefore encourage vertically integrated FDI. However, share of SAFTA member countries in total exports of the destination country does not have any significant impact indicating that inward FDI may not necessarily be attracted to countries with higher exports to SAARC as a proportion of total exports. IMPACT OF TRADE AND TRANSPORT FACILITATION Benefits from improved transport and trade facilitation measures bring obvious win-win outcomes for all trading partners. High trade costs such as transportation charges, documentation requirements, and clearance delays at the borders have a discouraging impact on trade and production similar to trade restrictions such as tariffs and quotas. Trade and transport facilitation measures targeted at improved trade logistics through simplification of customs procedures and enhanced connectivity bring direct benefits to exporters and consumers such as faster clearance and release of goods, increased transparency, and improved competitiveness. The benefits in the form of times savings and reduced costs to the trading partners benefits the economy as a whole. In South Asia, although lowering border tariffs was integral trade policy liberalisation since the 1990s, restrictive trade and transport facilitation have hampered intra-regional trade. Given the various issues of trade and transport facilitation in South Asia, a quantification of gains from identified regional infrastructure projects using BCA is performed. Although regional in nature, the benefits are computed for one country which is undertaking the project on its territory to demonstrate the extent of benefits that can accrue. The four projects include: Upgrading of the Kolkata-Petrapole/Benapole corridor and Customs Facilities; Development of Bagdogra Airport as a Gateway and Hub; Railway Improvement at between Lahore and Wagah; and Colombo Port Expansion. The positive impact of all projects is intuitive. As compared to national projects, these projects have the added benefit of high trade and tourism potential. The BCA for the projects in different scenarios demonstrates that the projects have high economic rates of return. Cost and time savings and increased exports from enhanced connectivity brings in high returns. The projects are immensely beneficial for the country undertaking the project and extension of infrastructure facilities could be considered by the countries jointly. Further, the importance of a supportive overall policy framework for the promotion of transport, trade, and tourism is underlined. SAFTA AND TRADE IN SERVICES Historically, the case for inclusion of services as part of SAFTA has been a strong one. As long as SAFTA is confined to goods, the member countries are far from progressing towards full regional economic integration. In this context, the 14th SAARC Summit at New Delhi was a landmark as it underlined the collective vision of South Asia of an inter-connected region where there would be free flow of peoples, goods, services and ideas. Some of the sectors included tourism and education services. The present study analyses five services sectors – construction and related services, higher education services, telecommunication services, health and related services and tourism and travel related services in seven South Asian countries, namely India, Pakistan, Sri Lanka, Bangladesh, Nepal, the Maldives, and Bhutan. Six of these seven countries are already part of the multilateral trading system where they have taken commitments to liberalise these sectors and still they are contemplating to further liberalise 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 including perhaps the three being discussed here. In this regard, while the study argues that all seven countries should make liberal commitments under the General Agreement on Trade in Services (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
Page 3 and 4: QUANTIFICATION OF BENEFITS FROM ECO
Page 5 and 6: QUANTIFICATION OF BENEFITS FROM ECO
Page 7: Preface Our consultations with seni
Page 10 and 11: viii CONTENTS 7. Revenue and Welfar
Page 13 and 14: Executive Summary OBJECTIVE This st
Page 15 and 16: EXECUTIVE SUMMARY xiii Table 1 EAMA
Page 17: EXECUTIVE SUMMARY xv India A full S
Page 21 and 22: EXECUTIVE SUMMARY xix ments on basi
Page 23: Part I BENEFITS FROM TRADE, INVESTM
Page 26 and 27: 4 QUANTIFICATION OF BENEFITS FROM E
Page 32 and 33: 10 QUANTIFICATION OF BENEFITS FROM
Page 46 and 47: 2 Literature Review and Rationale f
Page 60 and 61: 4 Effective Additional Market Acces
Page 68 and 69:
46 QUANTIFICATION OF BENEFITS FROM
Page 70 and 71:
6 Impact of SAFTA on Member Countri
Page 72 and 73:
Page 74 and 75:
Page 76 and 77:
7 Revenue and Welfare Implications
Page 78 and 79:
Page 80 and 81:
Page 82 and 83:
8 Impact of SAFTA on Inward and Out
Page 84 and 85:
Page 86 and 87:
Page 88 and 89:
Page 90 and 91:
Page 92 and 93:
9 Quantification of Benefits from T
Page 94 and 95:
Page 96 and 97:
Page 98 and 99:
Page 100 and 101:
Page 102 and 103:
Page 104 and 105:
Page 106 and 107:
Page 108 and 109:
Page 110 and 111:
Page 112 and 113:
Page 115:
Part II BENEFITS FROM DEEPENING INT
Page 118 and 119:
Page 120 and 121:
Page 122 and 123:
Page 124 and 125:
Page 126 and 127:
11 Construction and Related Enginee
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Page 134 and 135:
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
12 Tourism and Travel Related Servi
Page 142 and 143:
Page 144 and 145:
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
Page 154 and 155:
Page 156 and 157:
Page 158 and 159:
Page 160 and 161:
Page 162 and 163:
Page 164 and 165:
Page 166 and 167:
Page 168 and 169:
Page 170 and 171:
Page 172 and 173:
14 Health and Related Services 1 IN
Page 174 and 175:
Page 176 and 177:
Page 178 and 179:
Page 180 and 181:
Page 182 and 183:
Page 184 and 185:
Page 186 and 187:
15 Prospects for the Telecommunicat
Page 188 and 189:
Page 190 and 191:
Page 192 and 193:
Page 194 and 195:
Page 196 and 197:
Page 198 and 199:
Page 200 and 201:
Page 202 and 203:
Page 204 and 205:
Page 206 and 207:
Page 208 and 209:
Page 210 and 211:
Page 212 and 213:
Page 214 and 215:
Page 216 and 217:
Page 218 and 219:
Page 220 and 221:
Page 223:
APPENDICES
Page 226 and 227:
Page 228 and 229:
Page 230 and 231:
Page 232 and 233:
Page 234 and 235:
Page 236 and 237:
Appendix 8 Intra SAARC FDI Collabor
Page 238 and 239:
Appendix 11 Table A11.1 On an Emplo
Page 240 and 241:
Appendix 12 Original Commitments/In
Page 242 and 243:
Page 244 and 245:
Page 246 and 247:
Page 248 and 249:
Page 250 and 251:
Page 252 and 253:
Appendix 14 Table A14.1 Telecommuni
Page 254 and 255:
Page 256 and 257:
Page 258 and 259:
Appendix 15 REFERENCE PAPER Scope T
Page 261 and 262:
Bibliography Abelson, P. (1996),
Page 263 and 264:
BIBLIOGRAPHY 241 Cuba (2002), Negot
Page 265 and 266:
BIBLIOGRAPHY 243 (2004), Impacts of
Page 267 and 268:
BIBLIOGRAPHY 245 Silva, Patricia an
Page 269 and 270:
BIBLIOGRAPHY 247 (1998), Tourism Se
show all

Report

Create successful ePaper yourself

Delete template?

Save as template?