SAFTA comes into effect

FROM UPALI Rupasinghe in New Delhi

THE South asian Free Trade Area (SAFTA) paves the way for free trade in goods among the SAARC member nations with effect from yesterday.

As per agreement, which the Union Cabinet had ratified on December 29, India and Pakistan and Sri Lanka will bring their customs duties to zero per cent by 2013 while the least developed members, Nepal, Bhutan, Maldives and Bangladesh will do so by 2018.

India being the larger and relatively developed economy will provide concessions to Least Developed Countries (LDCs) including a mechanism for compensation of revenue loss due to reduction of duties.

The LDCs to be compensated are Bangladesh and the Maldives.

As per the agreed rules of origin, the twin criteria of change in tariff heading at four digital level and the value addition of 40 per cent for non LDCs and 30 per cent for LDCs, would apply.

In 1995, the 16th session of the Council of Ministers met in New Delhi agreed on the need to strive for the realisation of SAFTA and in 1998 at the SAARC Summit at Colombo decided to set up committee of experts to draft a comprehensive treaty framework for creating a free trade area and the agreement on SAFTA was signed in January 2004 during the 12th SAARC Summit in Islamabad.