New Delhi, July 1 :

The long-awaited South Asian common market was launched from today but its full impact will only be felt only by 2013 when trade tariffs in the region come down to between five and zero per cent.

Under the new liberalised regime, intra-regional trade could rise from the current $5-6 billion to $18 billion in five years, experts say. The South Asia Free Trade Area (SAFTA), which brings together India, Pakistan, Sri Lanka, Bangladesh, Bhutan, Nepal and the Maldives, was to have come into force from January 1 but was delayed for six months to give member countries time to put their systems in place. Nepal, however, has been given an additional month to usher in the new regime.

“The SAFTA launch may have been delayed by six months but India is hopeful that it will bring greater benefits to the least developed countries (LDCs) in the group — Bhutan, Bangladesh, Nepal and Maldives,” official sources said.

Under the new regime, tariffs on 4,000 items in these four countries are to be lowered from 12.5 per cent to zero by July 2008.

In the case of India, Pakistan and Sri Lanka, the tariff is to be lowered to five per cent by 2013. The objective is to raise intra-regional trade from levels of around $5-6 billion several fold and pave way for flow of investments to partner countries.

Studies done by leading think-tank Research and Information System for developing countries (RIS) estimate the intra-regional trade could rise to $18 billion in five years with the implementation of the SAFTA.

In addition, the zero tariff access to be provided to the LDCs are expected to see greater flow of investments to those countries, experts feel. “India has tried to give greater market access. In the case of Pakistan, we have tried to more or less address their concerns, which will see greater flow of textiles and clothes from across the border. In the case of LDCs, in particular the Maldives, we have agreed to all that they have asked,” the sources said.

India, however, is not happy with Pakistan, which has not switched over to the alternative system of having a negative list of goods where higher tariff would be maintained to protect the domestic market.

“We will be watching how Pakistan implements the SAFTA. It is a matter of concern that Pakistan is maintaining the positive list approach which is against the spirit of open trade,” sources in the commerce ministry said.

India has as many as 770 items on the permissible trade list with Pakistan, while many farm products continue to be on the negative list. The negative list has 884 items where Pakistan and Sri Lanka are concerned while the number of sensitive items is 763 for LDC countries.

The sensitive list includes mainly goods and products from the agricultural, textiles, chemicals and leather sectors and those reserved for small-scale industries (SSI).

In the case of Sri Lanka, the existing free trade agreement is expected to provide greater advantage with only some products expected to benefit under the SAFTA situation. Unlike Pakistan, Bangladesh has already announced it would lower tariffs on 4,271 items by five percent from July 1.

To facilitate cross border intra-regional trade, India is keen to set up a Land Port Authority that would be tasked with improving infrastructure at border posts with Pakistan and Bangladesh in particular.