This ratification will pave the way for enforcement of the first-ever regional trade agreement that provides for free trade in goods among the Saarc countries -- Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.

The cabinet meeting held with Prime Minister Khaleda Zia in the chair viewed that Safta agreement, signed during the 12th Saarc Summit in Islamabad in January 2004, is a historic milestone in the economic profile of the seven-nation bloc.

All members of the South Asian Association for Regional Cooperation (Saarc) are to ratify the Safta agreement by the end of this year, so that the accord comes into effect in due time and its enforcement is not hampered.

Official sources said the ratification of the agreement will be sent to the Saarc Secretariat, which will take further measures to complete its technical matters by next July.

The signing of the agreement two years ago was the culmination of a clear commitment the Saarc member states expressed in the Kathmandu Summit held in 2002 for the creation of the South Asian Economic Union.

The South Asian leaders at the 13th summit in Dhaka reaffirmed their commitment to implement the Safta on schedule. As part of the Dhaka Declaration, the Committee of Experts finalised the deal in its meeting on November 29-December 1.

The member states laid importance on Safta as the South Asian region is a big market of 1.3 billion people, which constitutes one-fifth of the world population.

Regrettably over 90 percent requirements of South Asian countries are still sourced from outside the region and conversely, a major part of region's exports are also destined for countries outside the Saarc grouping.

Officials said South Asia is not only demographically the largest regional bloc on the planet, it is also one of the fastest growing regions for several decades -- demographically, and now economically.

But the challenges it faces are perhaps the most serious as South Asia today is home to almost two-thirds of the world's poor. Nearly one out of every three people or over 600 million people struggle to survive on less than a dollar a day.

Saarc leaders at the Dhaka Summit agreed to address the wide income disparities exist within and between the countries in the region.

The objective of Safta, which will become fully operational by 2016, is to reduce existing tariffs to less than 5 percent within the stipulated timeframe among the member nations.

According to the Safta agreement, the non-LDC members -- India, Pakistan and Sri Lanka -- will reduce their tariff to 20 percent in the first two years (Jan 2006-Jan 2008). India and Pakistan to reduce tariffs to 0-5 percent in next five years (by Jan 2013) and Sri Lanka to reduce tariffs to 0-5 percent in next six years (by Jan 2014).

Tariffs will be reduced for the LDC members -- Bangladesh, Bhutan, the Maldives and Nepal -- to 0-5 percent by January 2011. For them, tariffs to be reduced to 30 percent in first two years (Jan 2006-Jan 2008) and 0-5 percent in eight years (Jan 2008-Jan 2016)

Bangladesh settled for 1,250 items on its sensitive list for the LDCs and 1,254 for the developing countries during the last expert committee meeting in Kathmandu.

In the first phase of Safta, according to the agreement, four important sectors -- rules of origin, list of sensitive products, compensation for least developed countries' revenue loss, and technical support for LDCs -- were selected for implementation.

Within the rules of origin, member countries shall agree on value addition for 40 percent to LDCs and 30 percent to non-LDC countries of Safta framework. Bangladesh, Bhutan, Maldives and Nepal will be providing 10 percent derogation facility.

Mandatory to all member countries within the rules of special production there are 190 products and the value addition for those products may vary from 25 to 40 percent.

In another provision, only those products were acceptable for free trade, which contain 20 percent local or 50 percent member countries' raw materials.

Similarly, the member countries agreed to review the list of negative products every four years. On compensation on revenue loss, the member states agreed to implement the provision in four years after the Safta implementation period.