Too much on my plate

Train tracks in Persia

Afghanistan’s recently rediscovered mineral wealth has attracted many eyes on this restive region for altogether a different purpose. Companies from west and east have bid for the mining rights in Hajigak region. Of the twenty two companies shortlisted fourteen are Indian, including a consortium of a state run company, Steel Authority of India Limited. The mineral wealth of Afghanistan is valued at between 1 – 3 trillion US dollars, more than the valuation of Indian economy at 1.6 trillion US dollars (at nominal prices). The situation looks rosy, with many Indian companies lining up for the contracts a few would definitely get lucky. India’s appetite for commodities will only rise in the future and a source so close to the country will only make things easy. However, on ground the picture is rather bleak.

Proposed train connection between Afghanistan and Iran

Though Kabul is just around 600 km from the Indian border, transporting minerals from Afghanistan to India is a tough task. With no transit agreement in place with Pakistan and Afghanistan being sandwiched between Iran and Pakistan, with no access to the shipping lanes, the only way out is using Iran’s sea ports. India has embarked upon an ambitious plan to link Hajigak with the port of Chabahar in southern Iran by a rail link. This train track will by-pass Pakistan completely and give India the advantage of easy access to Afghanistan. This arrangement will also help Afghanistan reduce its dependence on Pakistan for supplies and trade. However, the track record of Indian state owned companies building large scale infrastructure projects abroad have not been impressive. Construction of a power plant in Sri Lanka has finally started after many years of agreement. It will be interesting to see how quickly things move on this project.

On a multi lateral level the Istanbul conference concluded in Istanbul on 2 November 2011. The joint declaration did not come up with any strategic plan and merely reiterated what every one has been saying so far. However, mockingly though the declaration calls for promoting of tourism activities in the country. India was part of the process this year. Pressure from India and the US has worked and Turkey extended the invitation to India. Still the Istanbul process remains only one of many in a string of conferences being organised across the world.

Pakistan’s Yes – No – Maybe and Iran’s dirty bomb

Pakistan has decided to bestow India with the long pending “Most Favoured Nation” (MFN) status. This is mandatory under the SAFTA (South Asian Free Trade Agreement). The MFN status helps the countries to open up trade and shift to a state of “negative list” from that of a “positive list”. This essentially means that trade under MFN status will restrict only a small number of items mentioned in the negative list, as compared to the positive list system which only allows trade in a few items in positive list. The going has not been easy for Pakistan. It took Pakistan almost fifteen years to reciprocate the status after India granted it in 1996. The recent announcement has lead to a frenzy of activities in the Pakistani defence establishment and there has been going back and forth on the commitment from the civilian government. It is believed that Pakistani military is against any kind of close cooperation with India.

The MFN status in itself will not be enough; it calls for a major overhaul and coordination between the eight member states of SAARC (South Asian Association for Regional Cooperation). A possible integration of roadways, waterways and railways in the SAARC region is being discussed. This might prove to be a path breaking move to boost regional integration and development.

Where will this lead?

With the Afghanistan – Iran rail link and the MFN status offered Pakistan, things should look bright on the bilateral trade front. However, the growing concerns over Iran’s nuclear programme and safety of Pakistan’s nuclear weapons it will be a tough task to achieve all this. A report by the UN agency IAEA (International Atomic Energy Agency) is expected within days this week (7 – 13 Nov, 2011). It is widely believed that the report will say that Iran has reached the critical stage where it can acquire capabilities to induce nuclear chain reaction required for a nuclear weapon. There have been reports of both the US and Israel warning Iran to stay away from developing its nuclear capabilities. It is difficult to guess the outcome of the report, however what is plausible is even stricter UN sanctions on Iran. Given such a situation India will be in a tight spot with its ambitious Afghan – Iran rail link. Getting itself involved in the project might be counted as violation of the UN mandated sanctions and would definitely upset the Indo – US relationships.

Will Jasmine blossom in China?

Another growing concern lies across the eastern borders of India in China. A string of reports suggest that China is undergoing a sort of social movement. In the past China managed to gag media and stop unwanted news items from being shared with people. In recent years that trend has changed. Internet has proved to be much more difficult to control than the traditional media. Micro blogging sites like Weibo have made flow of information swifter. Taking a cue from the Arab spring the Chinese tried to organise a Jasmine uprising, which was brutally crushed before it could blossom. Internet proved to be a handy tool in organising the scattered jasmine protests in the country (despite strict control by the government). State owned media too has started pointing fingers at the government with editorials and news stories in Xinhua (the largest state owned English language daily) and other dailies. Other reports in international media paint a grim economic picture of China. Rising interest rates, increasing labour cost, fleeing entrepreneurs, unpaid construction workers, slumping property prices, crack down on dissidents and forceful land acquisitions by the government are widely talked and discussed.

Ai Weiwei, a celebrity dissident kept in illegal detention,
is now being slapped with a tax fine of 2 million US dollars 

India needs to take some time out to think about the possible fall outs of a revolution in China (which is not unlikely given the situation). Bilateral trade between India and China is expected to reach 100 billion US dollars in the next four years. China is already India’s largest trading partner and any upheaval in China might have serious consequences for Indian business environment.

With too much on the plate the fear is always that some tasty food will get ignored. The current situation might be a little overwhelming for Indian foreign affairs ministry, given the lack of personnel. The way events are developing in India’s neighbourhood, one thing it can not afford is lack of focus. This is a situation where every thing comes at the top of the priority list.

SAARC – The untapped potential

The poor cousin

The year 2011 marked thirty years* of existence of SAARC (South Asian Association for Regional Cooperation). After all these years, SAARC has little to show to its flourishing cousins like the ASEAN (Association of South East Asian Nations) or the SCO (Shanghai Cooperation Organization). Both regional associations have transformed themselves into globally respected trade blocs and are far more active compared to their South Asian cousin. SAARC on the other hand has proved no more than an alternate (and perhaps less controversial) venue for Indian and Pakistani ministers and bureaucrats to talk. So what really went wrong? 

Partly the timing of the association is to be blamed. The idea was mooted in late 70s by Sheikh Mujibur Rehman, the first Prime Minister of Bangladesh. However, the formal incorporation of the association did not happen till 1981, when the heads of the states of seven countries (Afghanistan joined in 2007) met in Colombo. This was the time when India witnessed a tide of insurgency in Punjab which later transformed into a full blown terrorist movement. The insurgency in Punjab was followed by a similar unrest in the northern most Indian state of Jammu & Kashmir. India blamed Pakistan for the terrorist activities in both the states. India’s involvement in Sri Lanka’s civil war and the subsequent fall out was another reason for India to go slow on SAARC. Domestic politics in the respective countries prevented them from actively engaging in trade dialogues with India.

As a result intra SAARC relationship went into a deep freeze even before it could mature into a meaningful dialogue. The very fact that the SAARC has barely met for sixteen times during its thirty years of existence is a proof of it being neglected by the member states. Meanwhile India, the largest member in terms of population, size and economy was looking at off shore forums like the ASEAN and SCO where domestic politics played little role and economic dividends were substantial. Regional politics had taken its toll, reducing SAARC to the status of a poor cousin among the Asian trade blocs.

Spring cleaning

Much has changed in the past couple of years, especially on the security front. The twenty six year old civil war in Sri Lanka has come to an end, militancy in the Indian state of Punjab has faded away from public memory, Jammu & Kashmir is witnessing lowest level of terrorist activities in two decades and India – Bangladesh are making tremendous progress to mend their relationships. However, Pakistan is still shrouded by the war against terrorism and its complex domestic politics. It will be some time before Pakistan returns on the path of growth.

Time has come when India should take the initiative to resurrect SAARC. According to 2009 estimates the SAARC region has a total population of 1.6 billion in an area of 5.1 million sq km and the total GDP amounts to USD 4.3 trillion (PPP). These statistics are exciting for any organisation looking at a business venture in the region. Sadly intra SAARC trade reached USD 687 million in 2009, a fraction of its global trade. On the other hand other regional organisation registered significantly high trade volumes among their member countries. ASEAN registered total intra regional trade to the tune of USD 387 billion in 2009 and SCO registered USD 8.4 billion in 2010. For a region which accounts for almost a quarter of the global population, the trade figures come as a shame. The proposed India – Bangladesh transit agreement will be a major step towards cleaning the mess hindering SAARC integration.

The extra mile

Will SAARC move beyond a photo opportunity?

Various global agencies including the European Union, Asian Development Bank, the World Bank, etc and countries like the United States show active interest in SAARC. These organisations publish working papers & statistical analysis to gauge the progress. However, the real job has to be done by the member countries. India being the largest country in the region should walk that extra mile to revive SAARC. Other SAARC members too should shed their inhibitions and take some bold steps (as Bangladesh has taken) to address concerns of India and enter into a relationship on equal footing.

SAARC needs a giant step forward. That would mean significant changes in current tariff regulations. Despite SAFTA (South Asian Free Trade Area) being in force since 2006, no substantial trade movements have happened with in the region (though intra SAARC trade jumped from USD 14 million to USD 687 million in 2009, it still remains dwarfed by its rivals like ASEAN and SCO). The member countries fail to understand the benefits of a real free trade area where goods and services can be exchanged without tariff or non tariff barriers. Such arrangements have immensely helped countries of ASEAN. India as a country too benefited from liberalisation of its economy. These are living examples of modern day economies harnessing benefits of increasingly globalised trade.

Lesson should be learnt from India – Bangladesh transit agreement which will help not just India but Bangladesh, Nepal and Bhutan to better their international trade by using Indian and Bangladeshi roads and ports. Physical integration of infrastructure of the region will pave way for smooth transit of goods across borders and will save time and wastage during transit. The challenge will be to integrate the two unstable western members in the folds of SAARC.

*The foreign secretaries of the seven founding countries met in 1981 in Colombo, Sri Lanka for the first time