SAFTA: Nepal weighs costs and benefits
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The government has ratified SAFTA and endorsed a tariff liberalization plan (TLP) which will drop prices of Indian as well as other South Asian goods from the next fiscal year.
For producers, however, the scenario ahead appears quite demanding. They will have to be efficient and competitive both in domestic as well as regional market to take advantage of the largest free trade area which will come into effect from January 1, 2006. “The Cabinet has endorsed SAFTA and we forwarded the endorsement notification to the SAARC Secretariat last week,” said Naindra Prasad Upathyaya, chief of Foreign Trade Division, Ministry of Industry, Commerce and Supplies. He said that the tariff for all the commodities except those included in the sensitive list will be lowered starting from August 2006. According to the TLP, customs duty for the products manufactured in SA will go down to 30 percent by the end of 2007 and further to 5 percent by 2015 end, with at least 10 percent annual tariff cut. “The exact rate of duty cut will be announced in the budget for the next fiscal year,” said Upadhyaya. Whatever be rate of tariff liberalization, customs duty for five South Asian countries including Bangladesh, Pakistan, Bhutan, Sri Lanka and Maldives will be higher than that for India. “This has been arranged in order to keep intact Nepal-India Trade Treaty,” said a MoICS official. As per the treaty, Nepal cannot lower tariff for third countries' products to the level or below applied for the Indian products. The treaty provides duty-free market access for Nepali manufactured products, except for few items, to India on a non-reciprocal basis. “Duty-free facility pledged by India will remain intact,” said Upadhyaya. This sounds rosy for the Nepali trade, two third of which is with India alone. But experts say that is not a complete picture. “Under SAFTA, India will have to lower tariff to 5 percent to all SAARC members. This will narrow down the existing wide tariff gap that Nepali products enjoy in India against other South Asian countries',” said Professor Dr Pushkar Bajracharya. Constricting of the tariff margin in India will diminish scope of and facility pledged in bilateral treaty, according to him. Under SAFTA, Nepal has adopted two set of sensitive lists - one including 1,299 products for LDCs and the other including 1,335 items for developing members - to protect domestic industries. In the list, manufacturing products such as carpet, textile and clothing, edible oils and oil extract-based products are included. “Those industries will have tariff protection,” said the MoICS official. Furthermore, no import duties will be reduced for lentils, husked rice, semi and wholly milled rice, wheat, cauliflowers, oranges, apples, black tea, ginger, spices and citrus fruit juice, among others. Despite the longer list of agricultural products in the sensitive list, experts rule out that SAFTA will protect the interest of domestic farmers. Reason, they attributed, is Nepal-India Trade Treaty. As Nepal-India Trade Treaty will continue to prevail over SAFTA, Indian primary products will continue to enjoy duty-free market access in Nepal, said they. Source:Kantipur Online |
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