A trade dispute between India and Pakistan threatens to set back a South Asian agreement that was set to create the world's biggest free-trade zone.
The dispute between India and Pakistan came to a head at this week's meeting of South Asian foreign ministers in Bangladesh. The dispute is affecting a fledgling trade deal that was painstakingly put together during four years of negotiations.
The South Asian Free Trade Agreement went into effect last month to expand trade among the seven countries of the South Asian Association for Regional Cooperation, or SAARC - India, Pakistan and Nepal, Bangladesh, Sri Lanka, Bhutan and the Maldives.
But heated exchanges between India and Pakistan at the SAARC foreign minister's meeting in Dhaka are threatening to slow down the agreement's implementation.
India has accused Pakistan of failing to put key provisions of the agreement into force, by not granting tariff reductions to goods imported from India. Indian officials say this is a negation of the contract, and will affect the "entire SAARC process in future."
Pakistani officials say Islamabad is treating India differently, because while Indian exports to their country have jumped by about 400 percent, Pakistan's entry into the Indian market has not been nearly so successful.
The regional conference ended inconclusively Wednesday, with the dispute between the two rivals referred to the region's trade ministers.
An Indian expert on South Asian affairs, S.D. Muni, says the dispute represents a blow to hopes that free trade between India and Pakistan could increase rapidly.
"India was hoping that perhaps with the opening of the SAFTA framework, perhaps we will move toward normalization of trade relations, which it seems unfortunately is not happening. So that is a setback, and it would dampen the enthusiasm of the rest of the South Asian countries, as was very clear during the Dhaka meeting," said Muni.
The free-trade pact is considered the most important achievement during SAARC's 20-year existence, and it is meant to help reduce poverty in the region. The region houses 1.4 billion people, or 23 percent of the world's population.
For years, the political tensions between India and Pakistan had cast a shadow over SAARC, preventing the group from achieving its objectives of accelerated economic and social development. Many had hoped that would change in the wake of a two-year-old peace process between the rivals. But analysts say the Dhaka meeting shows progress in South Asia may still be held hostage to old rivalries.