Report

36 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
17.49 in 1991 to 96.3 in 2004) and between Bangladesh
and Pakistan (from 62.5 in 1991 to 77.9 in 2004).
In the manufactures sector, IIT between Bangladesh
and Sri Lanka increased (from 31.1 in 1991 to 93.4 in
2004). IIT between them also increased in the textiles
sector (from 14.3 in 1991 to 80.3 in 2004) and other
manufacturing sectors (from 24.8 in 1991 to 86.7 in
2004).
Potential thus exists for increased trade between
Bangladesh and India and Bangladesh and Pakistan in
the agricultural raw materials sector. It also exists
between Bangladesh and Sri Lanka in manufactures,
textiles and other manufactures sectors.
Pakistan
Pakistan maintained high IIT with Sri Lanka in the
Agricultural Materials sector between 1991 and 2004
(97.6 in 1991 and 94.5 in 2004). However, its IIT with
Sri Lanka in the agricultural raw materials sector fell
sharply (from 94.2 in 1991 to 6.1 in 2004) while
registering a marginal increase with Bangladesh (from
62.5 in 1991 to 77.9 in 2004). In the food sector,
Pakistan’s IIT fell with respect to Bangladesh (from 95.9
in 1991 to 71.4 in 2004), India (from 96.88 in 1991 to
76.58 in 2004) and Sri Lanka (93.5 in 1991 to 68 in
2004). In the manufactures sector, Pakistan’s IIT with
India declined drastically (from 90.77 in 1991 to
14.19 in 2004) while in the textiles sector it showed
an appreciable rise (from 8.21 in 1991 to 89.69 in
2004).
There is thus large potential in trade between
Pakistan and Bangladesh in the agricultural materials
sector and between Pakistan and India in the textiles
sector.
In short, the results show that intra-industry trade
has increased in many sectors for the major trading
partners of SAFTA region in the year 1991 as compared
to 2004. Intra-industry trade between Sri Lanka and
India has increased in almost all sectors, especially in
chemicals, machinery and textiles. India and
Bangladesh have increased intra-industry trade in
chemicals, agricultural raw materials and textiles.
Bangladesh and Sri Lanka have increased their intraindustry
trade in chemicals and textiles. With respect
to Pakistan, we find that intra-industry trade with most
of the major trading partners of SAFTA region has
declined in many sectors. Textile is the only sector where
intra-industry trade of Pakistan has improved with
respect to other major trading partners. This indicates
that the region has the potential to integrate its production
structures in many sectors and improve its global
competitiveness. Intra-regional trade can lead to better
allocation of resources in the region; allow economies
of scale and improve efficiency in production.
Intra-industry Trade in the Textile Sector
We examine in greater detail the possibility of intraregional
trade in a sector where the countries of the
region are at different degrees of competitiveness and
compete in the third market, i.e. the textiles sector. This
detailed analysis is undertaken using UNIDO dataset.
However, at the industry level the trade data is not
bilateral therefore intra-industry trade with respect to
the rest of the world was studied for India, Pakistan,
Bangladesh and Sri Lanka in 1991 and 2004. Since
these four countries are also major exporters in the
world in textile sector some inferences are drawn on
the basis of the analysis. The trends as observed are
presented in Table 3.7.
Spinning, Weaving and Finishing Textiles Sector: India’s
IIT increased from 0.2 in 1991 to 0.4 in 2004. At the
same time Pakistan and Sri Lanka’s IIT have remained
low at 0.1 while Bangladesh’s IIT fell from 0.5 in 1991
to 0.3 in 2004. There is thus scope of trade between
India and each of these countries.
Manufacture of Made-Up Textile Goods Except
Wearing Apparel: Intra-Industry Trade for all countries
is very low for this sector. There is thus not enough
potential for increasing trade between these countries
in this sector.
Knitting Mills: Sri Lanka shows high IIT in this sector
with the other countries experiencing very low IIT with
respect to the rest of the world. There is thus large
potential for trade to expand between Sri Lanka and
the other countries in the study.
Manufacture of Carpets and Rugs: India and Pakistan
show no IIT in this sector with Bangladesh’s IIT
remaining low at 0.2 between 1991 and 2004. Sri
Lanka’s IIT fell from 0.9 in 1991 to 0.5 in 2004 which
highlights deterioration in IIT for Sri Lanka. There is
thus an insufficient case for increasing trade between
these countries in this sector.
Cordage, Rope and Twine Industries: India, Pakistan
and Sri Lanka exhibit high IIT in this sector. It is
noteworthy however, that both India and Sri Lanka’s
IIT fell from 0.9 in 1991 to 0.6 in 2004. With