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30 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA 3 Competitiveness and Complementarities INTRODUCTION The extent of competitiveness and complementarity, to a great extent, reflects the probability of success of a regional trading agreement. It has been argued, as discussed in Chapter 2, that greater the extent of competitiveness among the member countries the lower is the probability of a regional trading agreement to succeed. Countries with different comparative advantages and therefore greater complementarities, in principle, have more opportunities to trade with each other compared with those with similar comparative advantage profiles. Studies that have estimated the extent of competitiveness at the three-digit level (Samaratunga 1999 and Kemal et al. 2000) have estimated Revealed Comparative Advantage indices (RCA). These studies show that the countries in South Asia have almost an identical pattern of comparative advantage in a relatively narrow band of commodities. This indicates that a regional trade agreement may not lead to large benefits in terms of higher exports. With respect to the complementarities that may exist in the trading pattern, it is argued that the extent of complementarity is higher if the export profile of one country, or a group of countries, matches the import profiles of others in the region. Studies have not found high complementarity in the trade profiles of South Asian countries. World Bank (1995) evaluates the importance of trade complementarity for the success of policy-driven RTAs. The results show the trade complementarities are higher for successful arrangements such as the European Economic Commission (EEC), Canada-US Free Trade Area, and NAFTA; and lower trade complementarities emerge for unsuccessful arrangements such as Latin America Free Trade Area (LAFTA) and the Andean Pact. In terms of the computed value of trade complementarity, APEC was regarded as having the potential to succeed. The extent of complementarity is measured using the complementarity index. Furthermore, changes in the index over time can help determine whether their trade profiles are becoming more, or less, compatible. In this chapter, we estimate the extent of competitiveness and complementarities at five digit standard international trade classification (SITC) level between the four major SAFTA member countries, i.e. Bangladesh, India, Pakistan and Sri Lanka taking an average of three years for the period 1991–93 and 2004–06. The main objective of this exercise is to examine whether there has been a change in the composition of competitiveness/complementarity baskets of the region over time, especially given the fact that many of these countries have undergone a significant change in their production structures and there has been a shift away from agriculture towards manufacturing in most of the countries, while in India the shift has been more towards the services sector. INTRA-REGIONAL TRADING PROFILES OF SAFTA MEMBER COUNTRIES South Asia as a region has lagged behind in terms of its openness to trade in spite of the fact that most of the South Asian countries have undertaken substantial trade reforms during 1990s. Consequently intraregional trade has remained low as compared to other regions, e.g. ASEAN region. Further, bilateral trade within the region has been impeded by a number of factors like political tensions, high tariffs, large extent of informal trade, etc. A cursory examination of the intra-regional trade shows that India has the largest share in total intra- SAARC exports at 74.4% (Table 3.1). On the other hand, Maldives’ share in exports of the region is abysmal at 0.3%. The share of other countries too is very low with Sri Lanka’s and Pakistan’s share being at 8.6% each. Further, while SAARC export share to Nepal is an exception with the share being 59.28%, SAARC
COMPETITIVENESS AND COMPLEMENTARITIES 31 countries collectively do not export much to countries within the region as compared to the rest of the world. Total intra-regional exports comprise only 5.3% of total SAARC countries exports to the world. This indicates that there exists large potential for intra-regional exports. In terms of imports, Sri Lanka and Bangladesh have the highest share in imports within the region at 28 and 26.9% respectively (Table 3.2). This is followed by India at 17.3% and Nepal at 14.9%. Further, with the exception of Bhutan and Nepal, SAARC countries’ imports from other member countries is very low as compared to the imports from the rest of the world. EXTENT OF COMPETITIVENESS IN SOUTH ASIA Several studies have estimated competitiveness using Table 3.1 Share in Intra-Regional Exports of South Asian Countries in 2004 (million US$) <strong>Report</strong>er Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Total Country-wise Share (%) in Intra-SAARC Exports Bangladesh 3.9 105.2 0.7 44.7 10.2 164.7 2.8 Bhutan India 1593.3 83.9 42.2 736.9 505.1 1344.1 4305.4 74.4 Maldives 0.5 0.0 17.3 17.8 0.3 Nepal* 1.9 296.8 0.0 3.4 0.1 302.2 5.2 Pakistan 197.7 0.2 158.5 1.9 3.0 134.7 496.0 8.6 Sri Lanka 13.4 385.8 60.1 0.3 39.3 498.8 8.6 TOTAL SAARC 1806.3 88.0 946.8 104.2 740.9 592.4 1506.3 5784.9 100.0 World 9979.0 240.7 73529.7 544.7 1249.7 15907.5 7136.0 108587.3 Intra-regional 18.1 36.6 1.3 19.1 59.3 3.7 21.1 5.3 exports as (%) of SAARC exports to world Source: COMTRADE Note: * indicates the data source from IMF-DOT 2005. Data consolidated from estimated monthly/quarterly partner countries records. Data for Bhutan not available. Table 3.2 Share in Intra-Regional Imports of South Asian Countries in 2004 (million US$) <strong>Report</strong>er Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Total Country-wise Share (%) in Intra-SAARC Imports Bangladesh* 6.05 1,278.71 0.00 0.13 142.38 9.57 1,436.84 26.9 Bhutan India 58.75 70.40 0.00 342.88 91.95 361.31 925.30 17.3 Maldives 0.01 0.00 65.83 0.00 2.20 68.46 136.51 2.6 Nepal** 5.05 785.05 0.00 3.35 0.31 793.76 14.9 Pakistan 45.08 0.08 454.41 0.06 3.71 45.66 549.00 10.3 Sri Lanka 7.70 1,360.08 19.84 0.08 108.06 1,495.77 28.0 TOTAL SAARC 116.59 76.54 3,944.09 19.90 346.81 347.94 485.31 5,337.17 100 World 10,073.65 77.05 87,099.75 213.29 684.21 11,999.67 5,998.27 116,145.89 Intra-regional 1.16 99.33 4.53 9.33 50.69 2.90 8.09 4.60 imports % of SAARC in world exports ** indicates the data source from IMF-DOT 2005 Note: identifies data consolidated from estimated monthly/quarterly partner countries records * indicates Bangladesh, import from Bhutan data which is extracted from IMF-DOT 2005 statistic. Data for Bhutan not available.
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Part II BENEFITS FROM DEEPENING INT
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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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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