October 14, 2008

SAFTA custom duties reduction not to impact Bhutan

Foreign trade officials said that although the South Asian free trade area, which came into force two years ago, will reduce customs duties to 0 to 5% by 2015, it will not have an impact on Bhutan.

Mr Sangay Tenzin joint director of foreign trade of Bhutan said that "India is our biggest trading partner, so the preferential treatment is not really going to have impact on us. But it will, without doubt, open up export opportunities and provide options to trade with other countries like Bangladesh, particularly in ferrosilicon."

He added that “Five new ferrosilicon factories were approved in the last few years. But the government has now put a cap on any new silicon ventures because of its high power consumption.”

The custom duties are annually reduced with the help of the trade liberalization program. It a schedule of tariff reduction, wherein the SAARC countries are segregated into non least developed contracting states of India, Pakistan and Sri Lanka and least developed contracting states of Bhutan, Nepal, Maldives, Bangladesh and Afghanistan. The tariff for both non least developed contracting states and least developed contracting states are being reduced to 20% and 30% respectively within the time frame of 2 years since the launch of the agreement. If it is below 20% and 30%, annual reduction is made on the actual tariff rates for each of the 2 years on margin of preference basis of 10% and 5% respectively.