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The South Asia Free Trade Area (SAFTA) Agreement was signed on January 6, 2004 at the 12th SAARC Summit held in Islamabad. The treaty has come into force on January 1, 2006 and will be fully implemented by December 31, 2015. SAFTA is intended to strengthen intra-SAARC economic cooperation and maximize the region's economic and social potential through various instruments of trade liberalization. The agreement binds all contracting states to reduce tariffs to 0-5 per cent by December 31, 2015 (Krueger, et al, 2004). The primary objective of SAFTA is to benefit the small economies of countries like Bhutan, Maldives and Bangladesh. It is still debatable that whether SAFTA will achieve its objectives or not? It is correct that potential gains from SAFTA exist but successful implementation and large welfare gains are unlikely to be achieved under this agreement. There are many obstacles in the implementation and enforcement of SAFTA. Unresolved political tensions and low income groups are likely to derail much of the progress of the agreement.

The South Asian Association for Regional Cooperation (SAARC) is an economic and geopolitical cooperation among eight member nations that are primarily located [9] [10] in South Asia continent. Its secretariat is headquartered in Kathmandu,Nepal. The idea of regional political and economical cooperation in South Asia was first coined in 1980 and the first summit held inDhaka on 8 December in 1985 led to its official establishment by the governments [11][12] of Bangladesh, Bhutan, India, Maldives,Nepal, Pakistan, and Sri Lanka. In the intervening years, its [11] successors have grown in size by the accession of new member states. Afghanistan was the first to [13] have been accessed in the physical enlargement of the SAARC in 2007. The SAARC policies aim to promote welfare economics, collective self-reliance among the countries of [14] South Asia, and to accelerate socio-cultural development in the region. The SAARC has developed a role in external relations around with world. Permanent diplomatic relations have been established with [14] the EU, the UN (as an observer), and other multilateral entities. On annual scheduled basis, the official [14] meetings of leaders of each nation are held; meetings of foreign secretaries, twice annually. The next [15] summit is expected to be held in Kathmandu in first quarter of 2014, but the official dates for the [16][17] summit is yet to be determined.

Objectives of SAARC[edit]
The objectives and the aims of the Association as defined in the Charter are:

to promote the welfare of the people of South Asia and to improve their quality of life; to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realise their full potential ;

to promote and strengthen selective self-reliance among the countries of South Asia; to contribute to mutual trust, understanding and appreciation of one another's problems; to promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; to strengthen co-operation with other developing countries; to strengthen co-operation among themselves in international forums on matters of common interest; and to co-operate with international and regional organisations with similar aims and purposes. to maintain peace in the region