Report

CROSS-CUTTING ISSUES AND CONCLUSION 189
principle. Under the GATS national treatment is thus a
negotiated principle. Though many member countries
provide national treatment in many services sectors,
this cannot be taken for granted and members at large
still seem to consider that full national treatment may
not be accorded in services.
In the South Asian context given varied sizes of
countries and differences in the level of economic
development across the region, different forms of
taxation policy can arguably be one of the major
barriers to trade in services. Taxation policy seems to
be more complicated in those countries where states
have federal structure as taxes are levied at various
levels. India and Pakistan are the prime examples having
federal structure. Other countries like the Maldives,
Bhutan and to a limited extent Nepal, Sri Lanka and
Bangladesh tend to have a taxation policy which seems
to apply to only one or two levels.
Although taxation policy is fairly complex area,
regional integration may bring about some amount of
uniformity across the region. In addition, countries can
also learn from one-another’s experience.
CONCLUSION
South Asia is home to 21% of the world’s population.
However, the total income here is merely a little over
2% of the world’s total income (CENTAD 2006). On
the positive side, South Asia is growing faster than the
rest of the world. With a population of 1.5 billion South
Asia is a significant market. Even conceding that per
capita income in the region is relatively low ($766 in
2006), the collective purchasing power is so large that
the world can ill afford to ignore it. In addition, at
present this region may not look very attractive but in
view of its high growth rate it is likely to become far
more important market in the near future.
Overall, the services sector is growing faster than
manufacturing and agriculture in the region. Services
constitute a major sector in all South Asian countries
contributing 54.3% to the total GDP of the region
(South Asia Data Profile, The World Bank). However,
this sector’s contribution to GDP in individual countries
varies from as low as about 37% in Bhutan to as high
as 82% in the Maldives (The World Bank 2007).
Bhutan and Nepal are the only two countries from the
region where contribution of services is well below 50%
of GDP and this should not surprise us because in these
countries the services sector is largely dominated by
tourism and owing to different reasons tourism has not
yet played the desired role. In the case of Bhutan, it is
relevant to point out that the country had been relatively
conservative in opening its tourism sector. However,
since it liberalised its tourism, the sector has grown
exponentially albeit from a very low base which is likely
to be reflected in the form of increased share of services
in GDP only in due course. Whereas Nepal, a tourismdependent
country, has been facing difficult times and
as a result the number of tourist arrivals has rather
declined in recent years.
In South Asia, India clearly stands out as the largest
services exporting and importing country. With a share
of 2.7% of world exports of services, India was the
tenth largest services exporting country in the world in
2006 (WTO 2007). In addition, as the balance of services
trade has been in favour of India, this has largely
offset the deficit in goods trade in recent years. However,
India is a major services importing country as well
and with some improvement in their supply capacity
other South Asian countries can grab a portion of this
large pie. After India, Pakistan is a major services importing
country in the region. In 2006, Pakistan imported
$8.1 billion of services and was the 34th largest services
importing country in the list of leading importers in
world services imports (excluding intra-EU (25) trade).
It has been suggested that though there has been a
significant increase in the share of services in output of
all South Asian economies, there is tremendous
‘asymmetry’ in South Asian services trade: The output
and characteristics of this trade are largely driven by
rapid growth of this sector in India (CENTAD 2007).
In India, the structure of services trade has shifted from
traditional sectors like travel and transport towards
business services. However, as CENTAD suggests, there
has been no such major shift in the services trade of
other South Asian countries. Nevertheless, the latest
data suggest that in other countries too a shift could be
seen in the composition of services exports. In the case
of Pakistan the share of finance & insurance and
wholesale & retail trade sub-sectors increased in the
overall services sector in recent years (State Bank of
Pakistan 2007). Likewise, share of other commercial
services (other than transport and travel) has increased
from 50 to 61% in Bangladesh export of services (WTO
2007). In the case of the Maldives where tourism
overwhelmingly dominates the economy, share of other
commercial services in its total exports was almost
negligible at 1% in 2000, but has now increased to
3% of the total services exports. However, in Nepal a
reverse trend has been seen because share of other
commercial services in its overall services exports has
rather declined from 47% in 2000 to 40% in 2005.