Regional Cooperation in Trade, Finance and Investment Among SAARC Countries : The Bangladesh Perspective

Intra SAARC trade seems to be quite of a small order of magnitude. This might be because of normal outcome or because of unexplored trade opportunity. If the latter is the case, then increased trade within this region might be welfare improving. This study attempts to make a formal analysis of these issues, and estimates a gravity model of international trade to examine whether intra SAARC is lower or higher than what is predicted by economic model. This gives an idea about the structure of comparative advantage in the SAARC countries that help us to explain why intra SAARC trade is low and how trade among them can be increased. It also helps us to understand the possibility of trade creation and trade diversion effect resulting from SAPTA among SAARC countries. Liberalization of trade in SAARC countries offers significant gains for all the economies in the region. Efforts should be made to liberalize border trade and strengthen bilateral trade relations through separate sets of trade concessions in the general framework of SAPTA