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Intra-regional SAARC trade intensities have not picked up after the formation
of SAARC. This obviously means that SAARC countries are looking outside
the SAARC region for their trade. The lack of complementarities among the
SAARC economies is reflected in the diminishing trends ofthe trade intensity
indices. During the post-SAARC period (1986-98), intra-regional trade
intensities relative to the rest ofthe world were high in case ofNepal, followed
by Maldives, Bhutan, Sri Lanka, Bangladesh, Pakistan and India. India was
the only country, whose intra-regional export intensities have increasedfrom
the pre-SAARC period (1975-85) to the post-SAARC period. India's export
intensities with individual SAARC countries were far more than its import
intensities. oVerall India's trade intensities were high with Nepal, followed
by Bhutan, Bangladesh, Sri Lanka, Pakistan and Maldives during the pre-
SAARC as well as post-SAARC period.
Trade is one of the major priority areas of SAARC economic cooperation. In spite of
various commonalities among the SAARC countries, their intra-regional trade has been
less than 5 per cent of their global trade. Their share in global trade was about 1.1 per
cent in 1998. 6 It speaks a lot on the opportunities that they have lost. Nevertheless,
SAARC countries have succeeded in establishing SAARC Preferential Trading
Arrangement (SAPTA) in December 1995. They have decided to establish SAARC Free
Trade Area (SAFTA) by 2001. Their ultimate goal is to form SAARC Union on the
pattern of European Union (EU). Therefore, it is ·relevant to know the intra-regional
trade relations among the SAARC countries in the past. A measure of trade relationship
among partners is trade (both exports and imports) intensity, first developed and applied
by A.J. Brown. 7 It was further refined and utilised by K. Kojima8 with regard to the
effects of trade liberalisation on Japan. The present paper is an attempt to measure trade
intensity among SAARC countries with particular reference to India. Hence trade intensity
indices on both exports and imports sides have been computed for SAARC countries vis-
a-vis India from 1975 to 1998. The period 1975-98 is chosen as combination of pre-
SAARC (1975-85) and post-SAARC (1986-98), so that comparison could be made.
The export intensity indices have been computed as the intensity of country j's trade
with another country i, which is equal to the ratio of i's share in j's global exports to its
share in total global imports, less j's global imports. 9 Similarly, the import intensity
indices have been computed as the intensity of j's import trade with another country i,
which is equal to the ratio of j's share in i's global imports to j's share in total global
exports less j's global exports. 1° Country j's export intensity is the same as i's import
intensity and vice-versa.
Geographical proximity, economic complementarity, and politico-historical ties affect
the intensity of trade. The value of indices as zero implies that there is no trade relationship
between the two partner countries. An export intensity of more (or less) than 100 indicated
that country j is exporting more (or less) to country i than might be expected from that
country's share in total global trade. Similarly, import intensity of more (or less) than
100 indicated that country j is importing more (or less) than might be expected from that
country's share in total global trade.
During the post-SAARC period, trends of intra-regional export intensity have been
changed. Bhutan and Maldives were on top during this period, particularly from 1989,
when Nepal's exports to India were negligible due to strained political relations between
the two countries. Most of Bhutan's exports were to India. Further, Bhutan had some
export trade with Pakistan and Bangladesh. Maldives' export intensities were high due
to major share of its global export trade with Sri Lanka. Other SAARC countries like
India and Pakistan have also good trade relations with it. Next to Bhutan and Maldives,
intra-regional export intensities of Nepal were high during the post-SAARC period,
followed by India, Pakistan, Sri Lanka, and Bangladesh. It is relevant to mention that
intra-regional SAARC export intensities have declined in case of all SAARC countries
except India from the pre-SAARC to post-SAARC period. In case of India, these have
been increased marginally. As such, average intra-regional export intensity index increased
from 267.4 during the pre-SAARC period to 344.9 during the post-SAARC period. It
may be due to the fact that India is a big market, containing 76 per cent of population and
73 per cent of area of the SAARC region. 11 However, this export intensity index was still
less than the average total intra-regional export intensity index of353.7 during the post-
SAARC period. India's intra-regional export intensities were low among the SAARC
countries during the pre-SAARC period. However, due to their increasing trends,
Bangladesh became the low export-intensive country among the SAARC.countries during
this period.
It appears from above analysis that intra-regional export intensity indices were higher
than the desired level of 100 in case of each SAARC member, indicating the significance
of intra-regional SAARC exports relative to the rest of the world. Nepal, Bhutan and
Maldives had very high concentration to intra-regional SAARC exports during the pre-
SAARC as well as post-SAARC period. If we see the trends of overall intra-regional
SAARC export-intensity indices as mentioned in the last column of Table 1, the average
index dwindled from an average 368.7 during the pre-$AARC period to 353. 7 during the
post-SAARC period. As such, the formation of SAARC has not helped to increase intra-
regional export intensity.
Nepal was very much dependent on SAARC for its imports, followed by Maldives and
Bhutan. Rest of the SAARC countries have low concentration to intra-regional imports
during this period.
It is clear from Table 2 that Bangladesh and Sri Lanka have witnessed a higher intra-
regional import intensities during the post-SAARC period as compared to the pre-SAARC
period. However, Bangladesh's increase was much higher than that of Sri Lanka with
average index jumped from 615.5 during pre-SAARC period to 1155.6 during the post-
SAARC period. The other SAARC countries-Nepal, Bhutan, Maldives, Pakistan, and
India-experienced low intra-regional import intensities during the post-SAARC period
as compared to pre-SAARC period. Thus, overall average intra-regional import intensities
were lower during the post-SAARC period (338.4) than that of pre-SAARC period (347 .6).
It is noteworthy that India's intra-regional import intensities were low among the
SAARC countries during the pre-SAARC as well as post-SAARC period. The average
intra-regional import intensity index diminished from 112.1 (pre-SAARC period) to 64.6
(post-SAARC period). Furthermore, India's intra-regional import intensities were less
than the desired level of 100 except for 1992 during the post-SAARC period and for few
years during the pre-SAARC period, indicating the insignificance of India's imports
from SAARC relative to its imports from the rest of the world.
From the above analysis of intra-regional SAARC trade intensity, it is interesting to
note that India was the country, whose intra-regional export intensities increased and
import intensities declined during the post-SAARC period as compared to the pre-SAARC
period. Further, India's intra-regional import intensities were far less as compared to
other SAARC countries and were not even at a desired level of 100. However, its intra-
regional export intensities were higher than Bangladesh, Pakistan, and Sri Lanka during
the post-SAARC period. In fact, India's capacity to fulfill the import needs of SAARC
countries is far more greater than their capacity to meet India's import requirements. As
such, India's balance of trade with almost all the SAARC countries had been highly
favourable except with Pakistan for few years. It seems to be a matter of great concern to
other SAARC countries. Therefore, other SAARC countries should try to identify more
items, which India can import from them. Thus, it becomes relevant to discuss India's
trade intensity with individual SAARC countries.
SAARC period. Thus, it is clearly observed that though India's export intensities with
Nepal were high, but there has been a declining trend over the period. Leaving aside
Nepal, the export intensity index varied from 47 (Pakistan) to 1706.3 (Maldives) during
pre-SAARC period and between 1736.6 (Bangladesh) and 122 (Pakistan) during post-
SAARC period. It is clear from this table that there has been an increasing tendency of
India's export intensity with Bangladesh and Pakistan from pre-SAARC to post-SAARC
period. However, Bangladesh's increase was mtich higher than that of Pakistan. Other
SAARC countries experienced a declining tendency in India's export intensity during
the post-SAARC period as compared to the pre-SAARC period. Nevertheless, overall
India's export intensity with SAARC has increased with average index jumped from
267 .4 during pre-SAARC period to 344.9 during post-SAARC period.
It is interesting to note from Table 3 that Pakistan was the only country to whom
India's export intensities were low among the SAARC countries. During the pre-SAARC
period, average India's export intensity index with Pakistan stood at 47, indicating that
India's exports to Pakistan were less than the desired level of 100. During the post-
SAARC period, India's export intensity indices with Pakistan were more than 100 except
for 1986 to 1989 and 1991 with average post-SAARC index standing at 122. It indicates
that India's export intensity with Pakistan has been continuously increasing with minor
fluctuations.
Concluding Remarks
During the post-SAARC period, intra-regional trade intensities relative to the rest of
the world ~ere high in case of Nepal, followed by Maldives, Bhutan, Sri Lanka,
Bangladesh, Pakistan, and India. However, India was the only country, whose intra-
regional export intensities have increased from the pre-SAARC period to the post-SAARC
period. India's export intensities with individual SAARC countries were far more than
52 FOREIGN TRADE REVIEW
its import intensities. Overall India's trade intensities were high with Nepal, followed by
Bhutan, Bangladesh, Sri Lanka, Pakistan, and Maldives during the pre-SAARC as well
as post-SAARC period. However, India's trade intensity with Pakistan was not at the
desirable level.
On the whole, it can be concluded that intra-regional trade intensities have not
picked up after the formation of SAARC. This obviously means that SAARC countries
are looking outside the SAARC region for their trade. The lack of complementarities
among the SAARC economies is reflected in the diminishing trends of the trade intensity
indices. The magnitude of the volume of intra-regional SAARC trade is very low. Its
share in the global trade has even decreased from 4.5 per cent in the pre-SAARC period
to 3.9 per cent in the post-SAARC period.
It is relevant to note that in spite of the operationalisation of SAPTA, SAARC
countries have still high tariff structures. The slow process of SAPTA is manifested with
the fact that SAARC countries could finalise 226 items in the First Round (1995), 1,972
items in the Second Round ( 1996) and 5,500 items in the.Third Round ( 1998) for tariff
concessions ranging from 5 per cent to 75 per cent. However, the Fourth Round, expected
to be launched soon, would focus on SAFTA, intellectual property rights, and liberalisation
of trade in services. In view of the overwhelming support of business community of the
SARRC region, it is hoped that Fourth Round of SAPTA will lead to even greater progress.
Therefore, SAPTA is expected to augment the intra-regional trade of the SAARC. It
should be looked as a big pool of resources to be drawn by increasing SAARC trade
intensity.
SAARC TRADE INTENSITY AND INDIA 53
TABLE l
INTRA-REGIONAL SAARC EXPORT INTENSITY INDICES DURING 1975-98
Year Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka SAARC
Pre-SAARC (1975-85)
1975 197.0 n.a. 285.3 2720.9 5960.0 536.3 718.9 392.1
1976 489.5 n.a. 320.9 771.7 7338.8 560.5 857.4 458.6
1977 814.6 n.a. 305.4 1947.7 3088.l 659.3 810.2 445.4
1978 991.2 n.a. 358.0 825.3 2861.4 405.8 576.2 429.3
1979 703 .9 n.a. 358.3 2036.4 3696.8 551.7 566.5 448.3
1980 714.3 n.a. 314.2 2190.2 3115.5 517.5 583.8 416.4
1981 631.6 n.a. 219. l 1471.6 4281.7 418.5 673.5 367.1
1982 568.4 n.a. 130.4 853.9 3793.3 409.3 562.2 249. l
1983 576.6 n.a. 151.2 1096.7 3165.0 180.3 429.9 212.8
1984 817.3 n.a. 271.7 1138.6 3453.6 237.9 322.3 327.l
1985 540.2 n.a. 227.2 1220.2 2706.2 372.9 299.2 309.3
Average 640.4 0.0 267.4 1479.4 3951.0 440.9 581.8 368.7
Post-SAARC (1986-98)
1986 497.1 n.a. 246.6 1671.9 3171.6 263 .3 415 .3 304.6
1987 354.5 n.a. 252.4 1410.0 2412.3 343.0 344.7 300.l
1988 443.3 n.a. 245.5 877.0 1239.7 446.6 554.7 337.3
1989 384.2 n.a. 241.3 1320.9 268.3 345.6 555 .6 363.7
1990 334.5 978.9 250.2 1235.4 636.6 365.5 333 .9 290.2
1991 485 .3 864.4 359.7 1920.9 847.5 347.4 318.2 368.9
1992 212.0 948.6 371 .2 2401.7 1255.3 474.7 223 .8 385.I
1993 231.5 1182.0 389.4 3015.2 470.5 308.5 238.0 349. I
1994 220.4 3709.2 402.6 2474.4 394.7 323.3 136.9 347.6
1995 234.1 4415.l 443 .9 1943 .3 817.8 278 .0 234.0 389.2
1996 157.8 532.8 440.3 1075.1 1784.6 223.6 230.8 379.0
1997 199.0 n.a. 385.6 1421.5 2241.7 229.3 237.2 349.2
1998 221.2 n.a. 455 .4 1425.4 2997.5 403 .7 210.7 433.7
Average 305.8 1804.4 344.9 1707.l 1426.0 334.8 310.3 353.7
n.a.= Non-availability of data.
Source: IMF, Direction of Trade Statistics Yearbook (various issues) 1980-1998.
54 FOREIGN TRADE REVIEW
TABLE2
INTRA-REGIONAL SAARC IMPORT INTENSITY INDICES DURING 1975-98
Year Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka SAA RC
Pre-SAARC (1975-85)
1975 1094.7 n.a. 11 l.4 0.0 7547.2 357.3 906.3 41 l.9
1976 1002.7 n.a. 13 l.8 3978.6 8380.2 358.5 125 l.7 431 .6
1977 709.2 n.a. 91.0 2440.8 6409.0 704.9 1298.9 430.0
1978 606.6 n.a. 80.1 5125.0 6074.9 510.2 1279.3 396.0
1979 518.0 n.a. 87.1 5028.6 6949.5 378.2 1690.6 399.5
1980 552.0 n.a. 159.6 3503.9 7187.3 347.7 973 .7 383.4
1981 743 .7 n.a. 207.6 1085.9 6532.4 299.2 823.2 385.5
1982 367.1 n.a. 100.6 3700.8 3120.6 239.3 639.9 226.l
1983 297.9 n.a. 78 .3 961.1 3062.4 225 .4 83 l.9 208.8
1984 414.2 n.a. 93.2 1237.2 4008.3 283 .1 952.8 295 .2
1985 464.5 n.a. 92.1 1347.4 4474.7 217.4 868.6 255 .1
Average 615.5 0.0 112.l 2582.7 5795.l 356.5 1047.0 347.6
Post-SAARC (1986-98)
1986 479.2 n.a. 64.9 1542.3 4192.9 237.4 1064.3 272.1
1987 574.2 n.a. 66.6 1366.4 2531.2 216.2 912.1 247.6
1988 695 .6 n.a. 63.2 1406.2 2396.9 246.0 1053.4 275.2
1989 562.3 n.a. 35. l 1229.9 1520.3 220.6 763 .9 216.9
1990 849.7 857.4 50.5 1531.5 1428.6 203.4 867.2 233 .3
1991 909.0 519.8 60.4 1752.7 2444.2 173.9 1241.5 313.1
1992 1234.7 364.7 101.3 1723.6 2121.5 180.4 1480.6 372.0
1993 1356.7 357.7 53 .0 1776.1 1969.1 176.6 1185.9 364.0
1994 1452.7 1371.0 58.0 1828.8 1912.6 162.8 1122.5 357.3
1995 1957.8 2314.4 63.l 1455.6 1938.1 162.8 1263 . I 424.0
1996 1735.9 1429.5 57.9 1704.5 3617 280.5 1371.9 436 .6
1997 1442.7 n.a. 52.2 859. l 3020.9 218 .5 1221.1 408 .4
1998 1772.5 n.a. 113.4 937.6 3213. I 245 .0 1213.1 479.2
Average 1155.6 1030.6 64.6 470.3 2485.l 209.6 1135.4 338.4
TABLE4
INDIA'S IMPORT INTENSITY INDICES WITH SAARC DURING 1975-98