ISAS Insights

South Asia accounts for 22 percent of the world's population, two percent of the world's gross national product and is home to about 40 percent of the world's poor. However, the region's seven countries contribute only about one percent to world trade. Combining this low level of economic development with political and ethnic disparities makes this region economically and politically very sensitive. With the ratification of the South Asian Free Trade Agreement (SAFTA) in March 2006 by all the member states, the process of liberalising trade and investment has been set in motion. It has been two decades since the South Asian Association for Regional Cooperation (SAARC) came into being and even though the process of trade liberalisation has been slow, it has not died. This paper highlights the journey of South Asia from the SAARC to the South Asian Preferential Trading Arrangement and now to the SAFTA and draws comparisons between the provisions. It also brings forth the issues that need to be addressed if the South Asian economies want to benefit from this free trade agreement (FTA). The paper argues that South Asia needs to re-look at some fundamental trade and political issues and give precedence to trade if it wants a well-implemented FTA encompassing substantial trade among the member states.