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180 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA transfer and improved management leading to lower prices and better services. When FDI (Foreign Direct Investment) was first allowed in this sector, it helped domestic players in two ways. Firstly, operators were able to share risks. Getting equity from abroad was an attractive source of capital for domestic players in the early stages since it was costless form of finance until profits were made. Secondly, domestic operators imported most of the equipments from abroad and foreign equity was able to finance it. Easing entry restrictions and increasing the threshold for foreign equity further will enable new investments especially in Bangladesh and Pakistan, two countries with large populations and enormous unmet demand. The popularity of prepaid mobile, in SAFTA countries accounting for as much as 70% of customers, has lowered barriers to telecom use by the financially constrained. But wireless is not the only thing that matters. The technological and business innovations that make possible the current levels of participation and that will enable millions more to participate are not new. Consumer-driven content and further refinement in business models focussed on mobile broadband plans are tipped to be the likely winners in coming years. Other key developments expected in the future include the further progress towards next generation networks (NGN), moving infrastructure to an IP packet-based, full service typology. In addition, many of the major players having consolidated businesses to strengthen their positions in the face of increased competition will begin to launch additional services (such as Vodafone with broadband), capitalising on growth areas in other sectors and further contributing to the convergence of technologies. Increased cooperation among SAFTA economies in this sector will perhaps catalyse this process. What has held back their deployment has been the lack of investment; what has held back investment for the most part has been the unsatisfactory policy and regulatory environment (Samarajiva 2007). Poor policy and regulatory environments drive up the costs of supplying telecom services by increasing regulatory risk. An uncertain and discretionary policy and regulatory environment constrains investment. In all countries of SAFTA, the regulator responds to political economy pressures. In India TRAIs powers have been restricted by the government and has been hard pressed to try and establish its independence. PTA has been recently created and needs to ensure that lessons from India are truly incorporated into the institutional design. CONCLUSION Benefits of the telecommunications sector are no longer thought to be confined to the sector itself. The role of telecommunications as essential to the facilitation of international trade, economic development, and the enrichment of citizens’ lives has become widely accepted (WTO 1998). Many emerging economy governments which joined in making GATS commitments on basic telecommunications had come to view inadequate telecommunications networks and services as an impediment to achieving their full economic potential. The framework developed by GATS, under the WTO regime, has caused basic changes in the market structure of telecommunications sector across the world. The paper has shown significant gap between commitments made by countries under GATS and the applicable regime. By not binding the existing regime, countries retain discretionary power to ‘backslide’ which is not a good signal for increased investment. Countries should consider improving the commitments under GATS because such an action will improve the regulatory environment of the telecom sector and create the conditions for foreign investment on favourable terms. The decision should be taken because governments believe it to be in the interests of the people of SAFTA and not due to any external compulsion.
16 Cross-Cutting Issues and Conclusion Apart from the sector specific issues, which have been discussed in respective sectoral chapters, there are some cross-cutting issues which are relevant to many services sectors particularly construction, education, health and tourism services. Issues such as developing MRAs, issuance of visa, conducive FDI regime and uniform taxation policy are some of the cross-cutting issues which warrant more detailed discussion. While the former two issues can be addressed with a view to facilitating movement of service providers in the region, the latter ones can have very positive implications especially on commercial presence. Thus all South Asian countries are expected to address these issues if they wish to gain from trade in services. MUTUAL RECOGNITION AGREEMENTS As discussed in the previous chapters, developing MRAs is a crucial element for delivery of services particularly through Mode 4. Lack of recognition of qualifications, skills, or experience is one of the most common barriers affecting Mode 4 (Chanda 2005). It either denies market access altogether to foreign service providers or induce such suppliers to perform in a capacity that is below their level of qualifications (academic or otherwise). The mechanisms for assessment of equivalence of qualification, licensing, and other requirement related regulations with a view to improving market access have been developed under a number of regional arrangements – the prominent examples being the European Union, NAFTA, TTMRA (between Australia and New Zealand), etc. Since the area of domestic regulation is not covered by market access commitments the issue becomes all the more important. Under the GATS thus far not much progress has been made. India raised the issue of implementation of obligations under Article VII of GATS on recognition in the special sessions of CTS vide its negotiating proposal on Mode 4. 1 India rightly considers that obligations under Article VII are an area of crucial significance, especially for professional services. It has also an impact on the value of commitments for professional services because the value of such commitments is greatly affected by the manner in which such obligations carried out by members. On India’s request when the WTO secretariat compiled the notification obligations in 2003, it was found that during the past three years only two such agreements had been notified by members as required under Article VII: 4 (c). 2 The sectors to which such notifications refer are often unclear from the notifications. Moreover, as all the agreements notified so far had been post-facto notifications, adequate opportunities were not provided to other members to indicate their interest in participating in these negotiations and negotiating their accession to such agreements or negotiating comparable one with the member(s) concerned. Issues relating to recognition are also closely linked to the mandate in Article VI: 4 regarding disciplines for qualifications requirements and procedures, licensing requirements and procedures and technical standards as all such measures have a bearing on recognition (India 2003). Thus recognition is one of the core issues under the work programme of the working party on domestic regulation (WPDR). India views the progress with respect to recognition issues as one of the crucial elements for effective market access in Mode 4 especially for professional services. Lack of recognition can act as a significant barrier to providing services under Mode 4. In light of this, India suggests that the WPDR should consider the following alternative approaches for addressing the issue of recognition. These approaches can possibly be undertaken in parallel: 1 India’s Negotiating Proposal on Mode 4, WTO Document, S/CSS/W/12, 24 November 2000. 2 WTO Communication from India, Implementation of Article VII of GATS, JOB (03)/120, 24 June 2003, http:/ www.commerce.gov.in/trade/international_trade_services_informal_papers_1.asp last visited on 1 November 2007.
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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2 Literature Review and Rationale f
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4 Effective Additional Market Acces
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6 Impact of SAFTA on Member Countri
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7 Revenue and Welfare Implications
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8 Impact of SAFTA on Inward and Out
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Part II BENEFITS FROM DEEPENING INT
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11 Construction and Related Enginee
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12 Tourism and Travel Related Servi
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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