It is cheaper for Sri Lanka to trade with Brazil than Nepal which is geographically much more closer. High trade cost due to lack of better connectivity bars Sri Lanka and Nepal from expanding their bilateral trade.
This scenario reflects the underlying cause of low intra-regional trade in South Asia.
So, policymakers and experts at the formal inaugural session of the 10th South Asia Economic Summit (SAES X) in Kathmandu on Tuesday afternoon called for reducing the trade cost in the region.
They stressed the need for infrastructure development and implementing the trade facilitation measures in the region to reduce the trade cost.
Nepalese Finance Minister Gyanendra Bahadur Karki formally inaugurated the three-day summit at a hotel in Kathmandu. The theme of the summit is: Deepening Economic Integration for Inclusive and Sustainable Development in South Asia.
In his inaugural speech, Mr Karki mentioned that poor connectivity and non-tariff barriers needed to be addressed to cut the trade cost.
In his speech Nepalese commerce minister Meen Bahadur Bishwakarma said that continuous cooperation was needed to make the regional integration a success.
Bhutan economic affairs minister Lyonpo Lekey Dorji outlined a list of doable to reduce the trade cost. He said that poor infrastructure, high cost of transportation and ambiguous customs procedures were the main problems impeding trade in the region.
Besides trade in goods, he also suggested working on trade in services in the region.
Maldives state minister for economic development Abdul Latheef Mohamed called for enhancing people-to-people connectivity in the region.
Nepal-based South Asia Watch on Trade, Economics and Environment (SAWTEE), in association with the National Planning Commission and the Ministry of Commerce of the Government of Nepal has organised the summit.
Dr Posh Raj Pandey, Chairman of SAWTEE, delivered the welcome and introductory speech where he said that despite a lot of problems, South Asia now emerged the fastest economic growth region.
On an optimistic note, he said that by addressing the non-tariff barriers and expanding transport and transit connectivity the regional trade cost could be reduced, which would ultimately enhance the intra-regional trade.
Dr Swarnim Waglé, Vice Chairman of National Planning Commission of Nepal, chaired the inaugural session. He said that the existing trade cost was a barrier to enhancement of regional competitiveness.
Ms Selima Ahmad, founder president of Bangladesh Women's Chamber of Commerce and Industry, told the FE on the sidelines of the event that reducing trade cost should be a key priority for the governments of SAARC countries.
"Besides reducing tariffs, smooth movement of goods is must to cut the trade cost and it is a long demand of the private sector," she added.
After the formal inauguration, a high level discussion on 'South Asian Integration: Collapse or Rejuvenation' took place. Mr Kanak Mani Dixit, founding editor of the Himal Southasian, moderated the session.
Today (Wednesday), the second day of the summit, several sessions on regional cooperation, intra-regional trade, cooperation in climate change and other areas will take place.
The summit will conclude tomorrow (Thursday evening).