SAARC
The South Asian Association for Regional Cooperation (SAARC) is the regional intergovernmental organization and geopolitical union of nations in South Asia. Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka. SAARC comprises 3% of the world’s area, 21% of the world’s population and 3.8% (US$2.9 trillion) of the global economy, as of 2015. SAARC was founded in Dhaka on 8 December 1985.Its secretariat is based in Kathmandu, Nepal. The organization promotes development of economic and regional integration. It launched the South Asian Free Trade Area in 2006. SAARC maintains permanent diplomatic relations at the United Nations as an observer and has developed links with multilateral entities, including the European Union.
In the ending years of the 1970s, the seven inner South Asian nations that included Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka agreed upon the creation of a trade bloc and to provide a platform for the people of South Asia to work together in a spirit of friendship, trust, and understanding. President Ziaur Rahman later addressed official letters to the leaders of the countries of the South Asia, presenting his vision for the future of the region and the compelling arguments for region. During his visit to India in December 1977, Rahman discussed the issue of regional cooperation with the Indian Prime Minister, Morarji Desai. In the inaugural speech to the Colombo Plan Consultative Committee which met in Kathmandu also in 1977, King Birendra of Nepal gave a call for close regional cooperation among South Asian countries in sharing river waters. After the USSR’s intervention in Afghanistan, the efforts to establish the union was accelerated in 1979 and the resulting rapid deterioration of South Asian security situation. Responding to Rahman and Birendra’s convention, the officials of the foreign ministries of the seven countries met for the first time in Colombo in April 1981. The Bangladeshi proposal was promptly endorsed by Nepal, Sri Lanka, Bhutan, and the Maldives but India and Pakistan were sceptical initially. The Indian concern was the proposal’s reference to the security matters in South Asia and feared that Rahman’s proposal for a regional organisation might provide an opportunity for new smaller neighbours to renationalise all bilateral issues and to join with each other to form an opposition against India. Pakistan assumed that it might be an Indian strategy to organise the other South Asian countries against Pakistan and ensure a regional market for Indian products, thereby consolidating and further strengthening India’s economic dominance in the region.
Political issues in SAARC
Lasting peace and prosperity in the Indian subcontinent has been elusive because of the various ongoing conflicts in the region. Political dialogue is often conducted on the margins of SAARC meetings which have refrained from interfering in the internal matters of its member states. During the 12th and 13th SAARC summits, extreme emphasis was laid upon greater cooperation between the SAARC members to fight terrorism. The 19th SAARC summit scheduled to be held in Pakistan was called off as India, Bangladesh, Bhutan and Afghanistan decided to boycott it. It was for the first time that four countries boycotted a SAARC summit, leading to its cancellation.
South asian free trade area
SAFTA was envisaged primarily as the first step towards the transition to a South Asian Free Trade Area (SAFTA) leading subsequently towards a Customs Union, Common Market and the Economic Union. In 1995, Sixteenth session of the Council of Ministers (New Delhi, 18–19 December 1995) agreed on the need to strive for the realisation of SAFTA and to this end an Inter-Governmental Expert Group (IGEG) was set up in 1996 to identify the necessary steps for progressing to a free trade area. The Tenth SAARC Summit (Colombo, 29–31 July 1998) decided to set up a Committee of Experts (COE) to draft a comprehensive treaty framework for creating a free trade area within the region, taking into consideration the asymmetries in development within the region and bearing in mind the need to fix realistic and achievable targets.
The SAFTA Agreement was signed on 6 January 2004 during Twelfth SAARC Summit held in Islamabad, Pakistan. The Agreement entered into force on 1 January 2006, and the Trade Liberalisation Programme commenced from 1 July 2006. Under this agreement, SAARC members will bring their duties down to 20 percent by 2009. Following the Agreement coming into force the SAFTA Ministerial Council (SMC) has been established comprising the Commerce Ministers of the Member States. In 2012 the SAARC exports increased substantially to US$354.6 billion from US$206.7 billion in 2009. Imports too increased from US$330 billion to US$602 billion over the same period. But the intra-SAARC trade amounts to just a little over 1% of SAARC’s GDP. In contrast, in ASEAN (which is actually smaller than SAARC in terms of the size of the economy) the intra-bloc trade stands at 10% of its GDP.
India’s role in SAARC
India dominates the South Asian landmass and, due to its peninsular geographical configuration, has a long coastline that offers access to the Arabian Sea, the Bay of Bengal, and the eponymous Indian Ocean. Of the member countries of SAARC, India shares land borders with Nepal, Bhutan, Bangladesh, and Pakistan, and maritime borders with Sri Lanka and the Maldives. The only South Asian country with which India does not have a contiguous border is land-locked Afghanistan. During the Cold War, India’s estrangement from the United States, rivalry with Pakistan, and enmity with China combined to generate in Indian officials a sense of diffidence about the country’s de facto regional role, which was not in alignment with the New Delhi’s regional aspirations. This circumstance largely explains why India was a reluctant participant when the creation of a South Asian regional organization was proposed by Bangladeshi Prime Minister in 1980 and supported by all South Asian countries, except India and Pakistan. India feared joint pressure from regional states on contested security issues that New Delhi preferred to negotiate bilaterally. Pakistan was apprehensive about the creation of a regional grouping that would allow New Delhi both to pursue an anti-Pakistan strategy in concert with smaller neighbors and to enhance its economic dominance. Moreover, Pakistani leaders who had tried to use the Islamic connection to forge closer ties with the belt of Muslim countries to its west, particularly in the Middle East, feared a dilution of those links with greater engagement with South Asian countries. In the end, however, neither country could afford to spurn the Bangladeshi initiative. In an Indo-centric South Asia, New Delhi realized that rank obstructionism would undermine long-term Indian objectives. And, for strategic reasons, Pakistan could ill-afford isolation from a regional grouping of which India was a member.
The SAARC Charter was signed in December 1985 by the heads of state of seven South Asian countries—Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka. Afghanistan became a member in 2007. On paper, SAARC areas of cooperation run the gamut from science and technology, economic and trade to social, cultural, and educational issues, and people-to-people interchanges. But actual results have been meager at best. In the first decade of its existence, SAARC’s primary value was in providing a forum for dialogue. The organization sputtered to life in the last decade of the 20th century and has progressed, albeit glacially, at the turn of the 21st century, aided by developments at the domestic, regional, and global levels.
SAARC and India’s Evolving Self-Image
At its formation, SAARC had been hamstrung by a paucity of resources, a minimalist approach toward the organization by its largest and most powerful member—India, and the dilatory tactics of Pakistan. But the mindset of Indian officials shifted in the early 1990s as the end of the Cold War signaled a changing geopolitical landscape. The attenuation of the US-Soviet ideological conflict in the late 1980s and Soviet withdrawal from Afghanistan removed a key irritant in the Indo-US relationship and set the two countries on the trajectory of gradually improving ties that culminated in the cementing of a strategic partnership in 2004. Until the September 2001 Al Qaeda-sponsored terrorist attacks in New York and Washington, D.C. led to a U.S.- led invasion of Afghanistan and Pakistan re-emerged as a front-line state, this time in the battle against terrorism Pakistan’s role in U.S. strategy is unlikely to eclipse the enduring importance to the United States of a strong relationship with India, both as a hedge against China’s global rise and as an important economic partner. Cold War-era U.S.-Indian strategic estrangement is unlikely to be repeated in the 21st century. India’s rising economic profile also allowed Indian leaders to consider magnanimity towards its neighbors as a feasible option.
In 1989-91, Inder Kumar Gujral, then minister of external affairs in the V.P. Singh government, articulated a new approach towards countries in the neighborhood. Gujral argued that as the dominant country in South Asia, India needed to be sensitive to the concerns of its smaller neighbors and pursue accommodation and conciliation in an effort to promote cordial relations with countries in the region. Concrete action soon ensued with the withdrawal of the Indian peacekeeping force in Sri Lanka, which had been a source of friction in the bilateral relationship. In a nod to critics, Gujral also forcefully communicated to then Pakistani Foreign Minister Shaibzada Yakub Khan that his policy of non-reciprocal concessions to neighbors did not extend to Pakistani support of militants in the Kashmir region and he and Prime Minister Singh approved military action to check attempts by the Pakistani Army to alter “crucial points on the line of control (in Kashmir) in their favour.
The principles of the “Gujral Doctrine” were more forcefully incorporated into Indian foreign policy during Gujral’s Prime Ministership in 1996-98. He restarted a stalled 1994 dialogue with Pakistan over unresolved issues, signed a landmark water-sharing treaty with Bangladesh and inaugurated talks on the removal of tariff and non-tariff barriers to trade. With Nepal, he offered to “revise or scrap” the 1950 India Nepal Treaty, which was seen in Kathmandu as a symbol of unequal relations.
If Gujral’s initiatives did not bear more fruit in 1989-91, the problem rested not with the vision but with the dire straits of the Indian economy. Near bankruptcy in 1991 forced the Indian government of P.V. Narasimha Rao to undertake liberal economic reforms under the watchful eye of the International Monetary Fund (IMF). While the immediate results of these reforms were positive, inertia soon set in and by the time Gujral was at the helm again in 1996-98, economic growth had slowed considerably. India’s economic picture improved in the first half the 21st century and with it came renewed hopes for greater regional integration effort.
The South Asian Free Trade Area (SAFTA) SAFTA was envisaged as a way station toward a Customs Union, a Common Market, and eventually an Economic Union. Preliminary discussions were initiated at the 16th Session of a meeting of the Council of Ministers in December 1995 and the SAFTA agreement was signed in January 2004 at the 12th SAARC summit in Islamabad, Pakistan. To move this process forward, the SAFTA Ministerial Council and the SAFTA Committee of Experts meet regularly to review further steps. Both bodies will meet on July 22-23 in Thimpu, Bhutan. The SAFTA trade liberalization program was officially launched in July 2006 and since then, the total value of intraregional exports has, as of September 2013, been estimated at approximately $3 billion, a figure that the SAARC itself notes is far below potential.
A 2010 World Bank report implicates regional conflict as the primary reason for South Asia’s dubious distinction as the world’s least integrated regions and suggests 7 that “policy and institutional reforms aimed at removing domestic constraints to growth and job creation” have to be joined to “market integration and regional cooperation” if the two dichotomous faces of the region—one, dynamic, urbanized, and globally integrated and the second, agricultural, land-locked, and mired in poverty—are to be fused positively.
SAFTA, however, is unlikely to achieve its full promise until Pakistan engages willingly in trade liberalization with India. India’s bilateral free trade agreement with Sri Lanka, for instance, has a shorter negative list than in SAFTA. The same applies for Pakistan’s bilateral free trade agreement with Sri Lanka.xviii Indeed, some economists have argued that the commonalities among South Asian economies suggest a reduced potential for “comparative advantage-driven trade.” SAFTA’s tariff liberalization process (TLP) is based on a process of tariff reductions, with India and Pakistan slated to bring down 2006 tariff rates to 0 and 5 percent within five years and Sri Lanka within six years. The rest of the LDC (less developed countries) members were given ten years to effect this outcome. 2016 was identified as the target year for complete trade liberalization. This tariff reduction does not apply to items on the negative list of each country.
Prime Minister Narendra Modi has outlined a vision that appears to approximate such a role for India. The manifesto of his Bharatiya Janata Party (BJP) on which Modi contested the May-June 2014 elections to the Lok Sabha called for concerted efforts to strengthen regional forums like SAARC and ASEAN. Seen in this light, the invitation to leaders of SAARC countries to his inauguration as Prime Minister augurs well for a robust replay of the 8 principles of the Gujral doctrine. A concerted push to re-inject lost momentum into the SAARC process may rescue SAFTA from its lukewarm record so far. Pakistani Prime Minister’s decision to accept Modi’s invitation and his subsequent attendance at the event raised hopes in India that the visit would lead to a thaw in relations and a normalization of bilateral trade ties, and Pakistani acquiescence to India’s “longpending demand” for non-discriminatory market access (NDMA). The two countries had decided on a “roadmap” that would see India reduce its “sensitive list” to 100 from 614 by April 2013 after Pakistan had granted India normal trading status by December 2012, a commitment that Pakistan did not honor. A Pakistani cabinet meeting in April 2014 to resolve this issue was postponed in order to allow Islamabad to work with the new Indian government and is still pending. The Modi government has also indicated its intention to work toward reducing India’s trade surpluses with SAARC countries by taking measures to boost imports, to increase the services trade, especially in tourism and medical tourism by easing the process of granting multiple entry visas. And, finally, Modi has explicitly spoken of the need to undertake joint efforts to fight poverty