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Economic Cooperation In South Asia

Academics, experts from NGOs, businesspersons and retired government officials and speakers from South Asia gathered recently in Colombo to attend the Regional Seminar on “Economic Cooperation in South Asia” organized by the Friedrich Ebert Stiftung (FES) organization in collaboration with the CUTS Centre for International Trade, Economics and Environment (CUTS-CITEE), Jaipur, to dilate on their views and perceptions about the important issue of South-South economic cooperation in South Asia. Mr. Saman Keligama of IPS, Colombo set the trend by saying that we should guard against attempts by vested interests to discourage South-South trade, he cited a recent World Bank Report that opined that compared to North-South trade it was a failure, on the contrary there was enough evidence to show South-South trade has increased. It is true that market access comes at a cost but we must be careful about efforts to divide the economic unity of South Asia. He did not propose that links with North be done away with, on the contrary it should be complementary. Mr. AN Ram Former Secretary Indian External Affairs Ministry said that SAARC was a flawed concept and that it was agreed to without preparatory work, there should have been studies to delineate the parameters. Mr. Ram laid down a road map of six points, viz (1) economic cooperation must maximize inter-structural linkages where possible i.e. road, rail, pipelines (2) promoting sub-regional cooperation, we could also include Myanmar and Afghanistan (3) we should have bi-lateral Free Trade Agreements (FTA), alongwith a common investment regime (4) South Asia should not ignore linkages with other regions (5) South Asia should harmonize and coordinate policy on global issues and (6) we must remember that economic cooperation can be very beneficial for political issues. Speakers were apprehensive about the role of India within SAARC, taking into context the adverse trade regime that they have with Bangladesh. There are concerns whether SAPTA will really come into effect in January 2006, speakers opined that there will be shortcomings but it will come into effect and the differences can subsequently be ironed out.

Pradeep S Mehta and Huma Fakhar made some extremely interesting points in a recent article vis-à-vis Indo-Pak economic cooperation, viz (1) several myths continue to dog the debate and impede Indo-Pak cooperation (2) if commonality of purpose exists on the sports field, it can also exist in trade and (3) we should not repeat the mistakes made while history was being written. Among the issues viz (1) economic cooperation can precede and/or be simultaneous with dispute resolution (2) reciprocity must be the fundamental force driving dispute settlement (3) will India really dominate trade with Pakistan? and (4) will trade lead to disputes which will promote more conflict? Mehta and Fakhar say that if trade relations are strengthened it will have a huge peace dividend because countries trading with each other avoid conflict, using dialogue to resolve disputes, if any. All speakers agreed that a Indo-Pak rapprochement was central to full economic cooperation in South Asia. Mr. Posh Raj Pandey, Representative UNDP/His Majesty’s Government, Nepal says that the “sensitive” list has to be negotiated as well as the rules of origin. Provisions of SAPTA agreement make it clear that it will not stop at SAPTA but go on to economic union. A recent committee meeting held in Katmandu where four issues were addressed, viz (1) sensitive list has to be negotiated subject to maximum list, various countries have   placed   various  items   under   negative   list   e.g. Bangladesh 1393 items, Bhutan 133 items, Nepal 927, Maldives 584, Sri Lanka 1302, India 1302 items and Pakistan 1214 items (2) committee  has  circulated  draft  rules of origin and has agreed to the draft provided two conditions are met value addition to get SAPTA agreement with appropriate compensation for loss of customs revenues (3) addressing the major issue of less developed countries (LDCs) towards supply side constraints (4) capture the unofficial trade and bring it into official channels. The nutshell of Mr. Pandey’s arguments was that unless institutional reforms are undertaken, SAPTA will not become successful and we must bring services sector into the program. The problem is government delegates want to protect their industry rather than exploit the opportunities available. Mr. Abid Suleri from the Sustainable Development Policy Institute (SDPI), Islamabad said that we don’t want to become an isolated trading bloc but give us a better negotiation position with other established trading blocs. So we need to get real stakeholders into the negotiating rather than only representatives of government who tend to be overly protective about issues that are attracted to government only rather than the people-at-large. The government delegates are only pursuing the motivated interest in each country who are their silent partners. One would like to quote here Tarun Das, Former Secretary General Confederation of Indian Industry (CII), in an article “Build windows on those Fences” who said, “countries of the region need to think in terms of a collective South Asian Market, collective regional endowments and combined growth. The heterogeneity factor, in development levels within the region has its own challenge.  Most of us fail to look at ourselves as a single community of South Asians, and are often oblivious of our regional identity.  The countries of the region need to think in terms of a collective South Asian market, collective regional endowments and combined growth.  Opportunities are unlimited, resources are in plenty, but there are constraints of free mobility and connectivity. There are several disconnects at work in South-Asia.    But  this  is  what  underlines   the   need   for  faster  and extensive cooperation. Towards enhancing the much-needed cooperation, every country has a role to play according to capacity, but the larger ones have to take up larger responsibilities.”

South Asia provides a disappointing picture in every context – social, economic, and political. Growing at a robust rate averaging 7.1 percent per annum during 1994-95 to 1996-97, in the last three years of the 1990s i.e., 1997 to 2000 growth rates have declined to 5.2 per cent, because of the adverse impact of the East Asian financial crisis. In the year 2003-04 the region’s economy was expected to achieve a growth rate of 6.9 per cent and improve its performance further to 7.2 per cent in 2004-05.

Summing up Secretary General CUTS-CITEE Mr. Pradeep Mehta said that Governments apart, civil society, the intelligentsia, the business community, NGOs must all emphatically promote awareness about the need and advantage of regional cooperation.   South Asia has great economic strength in terms of its market potential, rich natural resources and human capital.  The need is to make SAARC a strong economic bloc, leaving aside bilateral disputes, as significant amount of trade is already taking place through informal/illegal channels.  Regional cooperation in South Asia will not only help to increase the level of intra-regional trade among South Asian economies but also integrating smaller economies into the larger regional economic space, thereby expanding the size of the market  and facilitating cost reductions through enhanced economies of scale. There ought to be a much greater interaction between the civil society and the political class across the different countries of South Asia. Regrettably such an interaction is minimal.  It would contribute significantly towards a quicker settlement of the differences and a greater South Asian solidarity, which is essential for the progress and  prosperity of all our people. South Asia has been occasionally described as Raju Kothari says “loveless hothouse where member states feed on each other’s fears”. If our people’s destinies are to be changed, we need to exploit each other’s strengths, feed on trust rather than fear or as Field Marshal Slim said in his book Unofficial History, “do not take counsel of your fears”.

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