From Nepal, a call to encourage trade within regions

Your latest issue was very informative. I was delighted to read about the harmonization of business laws by 15 African countries ("African Business Laws on CD-ROM, Internet", Forum 4/99). I believe this serves as an example of what the developing and least developed countries could achieve in boosting intra-regional trade and improving the investment climate of the region as a whole.

Regional trading blocks are proliferating, with the aim of expanding intra-regional trade. This type of trade can work as cushion against fluctuations in world trade. In the major regional groupings, intra-regional trade accounts for the large portion of the total trade of the member states.

Yet there is a difference in how effective regional trading agreements are in practice. Regional groups among developed countries have higher levels of intra-regional trade than those among developing countries. The share of intra-regional trade for countries in the South Asian Association for Regional Cooperation (SAARC) in 1996 was a meagre 4.3% of the region's total exports, according to a WTO report. During the same period, intra-regional trade formed 47.5% of the North American Free Trade Association's total exports, and 61.5% of the European Union's total exports.

Restrictive trade practices, lack of information and unreliable transportation links are three of the main factors inhibiting expansion of intra-regional trade in developing countries, despite the huge potential.

Trade relations amongst SAARC countries are affected by high tariff levels and non-tariff barriers, including quantitative restrictions and discriminatory practices, according to a study by the Centre for Economic Development and Administration in Kathmandu. Despite the liberalization of import tariffs by almost all SAARC countries, non-tariff barriers are hindering the potential for trade expansion. Regional trade agreements should address non-tariff barriers and restrictive trade practices.

Lack of information is a real barrier. In our region, the absence of a regional trade information bank is widely felt. Similarly, trade fairs that promote small and medium-sized enterprises of the region are few and far between.

Lack of reliable inter-regional transportation is another limiting factor for firms in the developing countries to reap the advantage of the intra-regional trade. The SAARC region needs to build an integrated transportation network. This could provide a significant boost to the flow of goods and people within the region.

Without addressing all these factors, it would be futile to expect a boost in intra-regional trade.

Navin Subedi is an MBA student at the School of Management,

Kathmandu University, Nepal