BANGLADESH INSTITUTE OF INTERNATIONAL AND STRATEGIC STUDIES

QUANTITATIVE ANALYSIS OF SAFTA: A BANGLADESH PERSPECTIVE

Author: Mohammad Rafiqul Hasan Siddiqui

DOI Link: https://www.doi.org/10.56888/BIISSj2008v29n2a4

ABSTRACT

The South Asian Free Trade Area (SAFTA) is the first FTA implemented in the South Asian region. The paper explores and analyses quantitatively the impact of SAFTA on trade flows and customs revenue of Bangladesh by using Partial Equilibrium (PE) framework. The paper also analyses in details the trade and revenue effects on some selected commodities at the aggregate level, and products have been selected for simulation on the basis of trade complementarity and export specialisation. The economic characteristics of South Asia and the salient features of the SAFTA agreement suggest that FTA alone may not generate substantial economic benefit for the countriesof the region. The current trade structure reveals that there are only few commodities that demonstrate high trade complementarities and export specialisation between Bangladesh and other South Asian countries. The paper finds that the estimated trade generation by SAFTA is not substantial for Bangladesh and that the overall trade expansion is mostly driven by trade creation. Another finding is that most of the expanded trade would be generated by the efficient producer in the region. The likely consequences of SAFTA for Bangladesh’s revenue would not be significant and the amount of any revenue loss would be at a manageable level for the country.