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

India and its near neighbours

Six Decades and counting

After sixty four years and five wars, India is yet to sort a single dispute with its neighbours. On the contrary it has got itself into uncomfortable situation in the past. Be it the peacekeeping forces in Sri Lanka or constant meddling in the internal affairs of Nepal. Relationships with the neighbours are anything but cordial.

In 1971, India championed the cause of Bangladesh and helped carve a new country in South Asia. The first government of Bangladesh lead by Sheikh Mujibur Rehman looked all set to enter into a long lasting friendship with Mrs Gandhi. The dream met a premature end with the coup in 1975, which wiped out most of Bangladesh’s first family. India hardly took a second look at Bangladesh after that. With India getting more and more obsessed with its western neighbour Pakistan in the past few decades, there was hardly any attention paid to rest of neighbourhood.

India’s issues with Pakistan are deep rooted and extremely sensitive with its political class. It can be safely assumed that all the issues with Pakistan (including Kashmir) can not be resolved overnight or even in the medium term. However, this should not distract the attention of Ministry of External Affairs from its near neighbours. Pakistan is and will be an ongoing affair for a long time to come. India should spare some energy and resources to mend its ties with countries which can prove to be long term partners in regional cooperation.

What can we do?

Handing out aid is not a guarantee to good relations. Had it been the case, America should have been the world’s best friend. Secondly India can not afford to offer aid on a large scale, given the fact that there is a pressing need for social development with in the country. Under such circumstances the best way forward is to engage in increased business activity. And for once, these business activities should move beyond exchanging a few truck loads of onion and sugar, which only helps a handful of people that too for an extremely short period of time.

The long term strategy for India should be to establish business relations with countries like Bangladesh, Sri Lanka and Nepal on a larger scale. Bangladesh after a long time has a friendly government in power. Civil war in Sri Lanka has come to an end and Nepal will sooner or later have a full time prime minister. Given these favourable situations India should push for large scale contribution to these countries in form of setting up manufacturing facilities and some kind of secondary outsourcing (which some big Indian companies already are doing with South East Asian countries).

India should look for incentives for its private sector companies from sectors like two wheelers, pharmaceuticals, FMCG, BPOs, etc to set shop in countries like Bangladesh, Sri Lanka and Nepal. This will prove to be a win all situation for the countries. The local population will benefit from employment generated at the manufacturing unit, the economy will benefit from the money pumped in, the parent company will benefit from incentives and possible relaxation in export rules to foreign markets (Bangladesh gets substantial tariff exemption for its textile export to Europe).

Economic and trade connection will inevitably bring in more people to people contact, which in turn will help reduce the trust deficit. All three countries mentioned share very close cultural, linguistic and religious bonds with India. A little push on the economic front can change the way South Asians see each other. But before India does any of this, it should raise the profile of the ministry of external affairs.