New Delhi: Key agreements in the field of trade and environment will dominate the agenda at the 16th annual summit of the South Asian Association for Regional Cooperation (Saarc) being held at Bhutan’s capital Thimpu on 28-29 April.

“An agreement on trade in services will also be signed during the summit, thereby opening up new vistas of economic cooperation among Saarc countries," external affairs minister S.M. Krishna said in a statement on Monday.

To encourage regional trade, member countries had signed up to the South Asia Free Trade Agreement (Safta), which came into force in January 2006. Under Safta, India agreed in principle to prune its sensitive lists by 20%. Saarc member states have also agreed to reduce tariffs on 30% of tariff lines outside the sensitive lists to zero. However, trade within the region has remained below potential at $529 million (around Rs2,350 crore), rising from $16 million in 2006.

Nisha Taneja, professor at the Indian Council of Research in International Economic Relations (Icrier), who specializes in the Saarc region, said there was untapped trade potential within the grouping.

Regional pact: Bhutanese children wave flags of India and Pakistan as they await the arrival of Saarc dignitaries in Thimpu on Monday. Manish Swarup/AP

Trade facilitation and labour mobility are the key issues. “What is needed is to remove the non-trade barriers in trade within the region," she said.

A hostile political environment has often restricted the free flow of goods and services within the region.

Ram Upendra Das, senior fellow at Research and Information System for Developing Countries, part of the group that conducted the study and contributed to the draft agreement on services, said the pact will be comprehensive in covering all major dimensions.

Das pointed out, however, that at present only the framework will be signed and the details regarding trade liberalization will be negotiated afterwards.

The summit coincides with the 25th anniversary of the association’s founding. Prime Minister Manmohan Singh will lead the Indian delegation, which includes external affairs minister Krishna.

Bhutan, which is hosting the summit for the first time, has chosen climate change as the theme of the summit.

PTI reported that Pakistan indicated its Prime Minister Yousuf Raza Gilani may meet Singh during the summit and that efforts will be made to restart the composite dialogue process between the two countries.

As Gilani embarked for Bhutan via Nepal to attend the two-day summit beginning Wednesday, foreign office spokesman Abdul Basit said: “We would like to reactivate the engagement process if the meeting takes place."

PTI contributed to this story.