Stuart Mounter

By Sumudu Perera, Mahinda Siriwardana and Stuart Mounter

This chapter evaluates the economic impacts of SAFTA relative to alternative trade policies to determine which policies best deliver increased welfare to citizens, thereby helping to alleviate income disparities and poverty in the region. The study does so with a particular emphasis on the income inequality and poverty effects of trade liberalisation in South Asia on households in Sri Lanka. A static multi-country computable general equilibrium model for South Asia (SAMGEM) is formulated by incorporating a multiple household framework into the Global Trade Analysis Project (GTAP) model. A non-parametric extended representative household agent approach is used to estimate the income inequality and poverty effects of trade liberalisation in South Asia by using micro-household survey data. The findings revealed that amongst the different trade policy options considered, unilateral trade liberalisation ensures the highest welfare to all South Asian members followed by the customs union (with the exception of Sri Lanka) and the SAFTA. The poverty and income equality analysis for the Sri Lankan economy suggests that poverty is predominant in the rural and the estate sectors and Sri Lanka can achieve a significant progress towards poverty reduction as a result of implementing trade reforms.

Part of the book: Poverty, Inequality and Policy

By Subashini Perera, Mahinda Siriwardana and Stuart Mounter

South Asia faces enormous economic challenges unmitigated by generally poor economic growth. Increasing economic imbalance between countries hinders regional development. Recently, it has been confirmed that trade liberalisation aimed at expanding trade, has been insufficient in optimising the potential contribution of trade to economic development and reduce poverty. Thus, economists pay attention on Trade Facilitation (TF) which has the potential to contribute to economic development. This has motivated us to examine how TF can achieve this development in South Asia, where trade has yet to make its full contribution to economic growth. The aim of this chapter is to examine the economic impacts of TF on trade and economic growth in South Asia. Our analysis revealed that poor TF restricts trade between countries as it increases Trade Transaction Costs (TTCs). Trade delays are relatively high and affect the region’s landlocked countries even more adversely. An efficiently facilitated trading system will enable these countries to participate more actively in global trade. There has been greater focus on TF policies in South Asia, however due to the complexity of TF measures and their investment needs, it is difficult to identify which TF measures have the most significance for the region.

Part of the book: Poverty, Inequality and Policy