Published on The Financial Express
The Seventeenth SAARC Summit held last month in Addu Atoll in the Maldives has come up with a twenty-point Declaration articulating the aspirations of the regional leaders. The Declaration also mentions a host of deliverables over the coming days with a view to advancing the cause of South Asian cooperation and integration. In addition, four accords were inked in Addu to promote the agenda of economic cooperation. The Summit also provided an opportunity to discuss bilateral issues, and there were some positive developments in this regard as well. It is pertinent to recall here that the foundation of SAARC as an organisational entity was premised on the notion of regional integration in South Asia through concrete initiatives and focused actions. The urgency of making regional cooperation work for the common good of the people and economies of the region, at this particular juncture, is also reinforced by the fact that South-South collaboration has been gaining increasing traction worldwide. Indeed, the latest UNCTAD annual report is themed on the potential role of South-South Cooperation for inclusive and sustainable development. The issue is gaining strength and currency also in view of the current Euro-zone debt crisis and a slower global economic recovery. In the context of this development, it is not surprising that this year’s SAARC Summit and its outcome drew renewed attention from all relevant stakeholders involved in promoting the cause of South Asian cooperation. As is known, while South Asia accounts for only three per cent of the world’s surface area, it is home to nearly 1.5 billion people, making up about twenty per cent of the world population. By contrast, the combined GDP of South Asia is less than three per cent of the global economic output; and the region has the world’s largest concentration of impoverished people. It was felt that SAARC would serve as a vehicle to promote regional integration by promoting intra-regional trade in commodities, services and energy, addressing non-tariff barriers (NTBs), fostering investment, helping to mitigate the adverse climatic impacts, promoting seamless connectivity and facilitating greater movement of people within the region. Indeed, it was hoped that the SAARC members would gain significantly by leveraging the advantages accruing from regional cooperation towards accelerating growth and structural changes in their domestic economies. How far have the lofty ambitions and the expected benefits, which were at the core of the establishment of the eight-member regional grouping, been achieved? Or to be more fair and concrete, to what extent has the Summit, the 17th edition, been able to move forward the vision and agenda of South Asian cooperation and integration forward? This is a question that deserves serious reflection in light of the outcomes that emerged from the recently held Summit. This write-up is a reflection on the Summit outcomes in view of the Addu Declaration. In addition, the paper also seeks to draw attention to some of the urgent concerns and tasks from the perspective of taking the agenda of South Asian cooperation to the next level in the coming days. Addu Declaration : An early assessment The underlying theme of the 17th SAARC Summit was “Building Bridges”. This spirit of connectivity and closeness, embracing all potential areas of cooperation, was expected to reflect the Summit outcomes. In the event, the SAARC leaders agreed to a twenty-point Addu Declaration which articulated their common views and aspirations. Foreign ministers of eight member countries, on the sidelines of the Summit, also signed four agreements, which were geared toward addressing concerns in many important areas. The deals include: (i) SAARC Agreement on Rapid Response to Natural Disasters, (ii) SAARC Agreement on Multilateral Arrangements on Recognition of Conformity and Assessment, (iii) SAARC Agreement on Implementation of Regional Standards, and (iv) SAARC Seed Bank Agreement. It is worth recalling here that, at the inaugural session of the Summit, President Nasheed of the Maldives urged the SAARC leaders to make progress particularly in three core areas of co-operation. These related to: (i) trade, transport and economic integration; (ii) security issues including food security and climate change; and (iii) good governance. He also urged member countries to downsize the ‘sensitive lists’ in the SAFTA in order to foster intra-regional trade in goods and services. Promoting intra-regional trade and investment Whilst the expectations ran high, the Declaration came up with only a general statement, in Article 1, with regard to making the South Asian Free Trade Area (SAFTA) effective and in terms of addressing the issue of NTBs. Article 1 calls upon members to reduce the number of items in the respective sensitive lists of member countries. In a welcome and pleasantly surprising development, the Indian Prime Minister, in his speech at the Summit, announced new initiative to cut sensitive list under the SAFTA from 480 to only 25 for the region’s poorer nations. Since Nepal and Bhutan already receive duty-free market access for virtually all products in the Indian market, and exports of the Maldives and Afghanistan to India are rather of limited nature, as a matter of fact it is Bangladesh which stands to gain most from this initiative. It is pertinent to note here that intra-regional trade in SAARC is one of the lowest, compared with the other regional blocks (only about 5.0 per cent of global trade through formal channel). It is hoped that New Delhi’s step will create fresh opportunities for Bangladesh and other South Asian LDCs to boost their trade with India, particularly with its North-Eastern states. Realisation of such opportunities, however, will critically hinge on effective and sustainable supply-side capacity development by the South Asian LDCs and on their ability to raise and realise competitive advantages of their products. Attracting FDI to SAARC LDCs, targetting the Indian market, will likely play a key role in this context. Pakistan has announced in Addu that it will grant the Most Favoured Nation (MFN) treatment to India. Islamabad had earlier given MFN treatment only to a selective number of Indian exports (there were about 1150 items in this positive list). Now it has agreed to come up with a negative list in the context of MFN treatment to be accorded to India. Pakistan has also indicated that it will subsequently move towards providing duty-free access to India for virtually all items. It will be relevant to recall here that, at the November 7th General Council meeting of the World Trade Organization (WTO), India has decided to withdraw its earlier opposition to granting a waiver to Pakistan by the European Union (EU) in the context of EU’s proposal to offer duty-free market access to Pakistan for 75 tariff lines of export to the 27-nation regional club, mostly in textiles products. Indeed, granting of the MFN status to India appears to be a quid-pro-quo between India and Pakistan. Bangladesh had earlier requested the EU to put a tariff rate quota (TRQ) on export of eight apparels tariff lines to safeguard her export interest in the EU in view of the potential surge in Pakistan’s shipment of apparels to the EU and possible displacement of Bangladesh’s export in this important market. Taking advantage of, and building on this conducive environment, SAARC countries should now try to forge a common stand in view of the Eighth Ministerial Conference of the WTO (MC8, to be held in Geneva during 15-17 December, 2011). Addressing the NTBs that are a major obstacle to intra-regional trade is key to fostering greater intra-regional trade in South Asia. Harmonisation of standards concerning the tradables is an important element in this process. As noted earlier, the SAARC foreign ministers have signed two agreements in Addu concerning mutual recognition of quality and standards and conformity assessment. As is the case, the first meeting of the Governing Board of the South Asian Regional Standard Organization (SARSO) will be held in Dhaka in December, 2011. It is hoped that the Summit agreements will be followed up with concrete actions so that NTBs can be removed in a meaningful manner. It may be recalled here that, a decision was taken at the 13th SAARC Summit in November 2005 to reconstitute the South Asia Development Fund (SADF) into SAARC Development Fund (SDF). SDF was to serve as the “umbrella financial mechanism” for all SAARC projects and programmes. Till now, India and Bhutan are the only countries which have paid their respective subscription to the SDF whilst an additional US$100 million was donated by India as voluntary contribution for financing social development projects. With only the Social Window of the SDF currently in operation, progress so far has been rather discouraging. There is a need to operationalise the SDF through concrete projects. The SAARC Investment Treaty was to be signed at the Thirteenth SAARC Summit in Dhaka in 2005. The deal, however, could not be nailed down due to lack of consensus among member nations. Time has now come to sign the agreement to promote intra-regional investment in South Asia. Physical connectivity within South Asia The issue of transport connectivity received close attention at the Addu Summit. A number of points in the twenty-point Declaration, particularly Articles 4 and 5, were related to promoting regional connectivity. The Summit called for conduct of a demonstration run of container trains from Bangladesh to Nepal via India. A Regional Railways Agreement is expected to be concluded before the next Session of the Council of Ministers in 2012. It may be recalled here that a Memorandum of Understanding (MoU) was signed between Bangladesh and India in September 2011 to facilitate overland transit traffic between Bangladesh and Nepal using Indian territory through the Radhikapur-Birol line (subsequent to conversion of the Bangladesh part into broad gauges). The Addu Declaration also directs the SAARC Secretary General to conclude preparatory work related to the Indian Ocean Cargo and Passenger Ferry Service by the end of 2011. These are indeed welcome initiatives. However, it should be noted in this connection that, despite repeated attempts, a consensus is yet to be reached with regard to arriving at a regional transit agreement encompassing the entire SAARC region. This would have reinforced bilateral and plurilateral transport protocols and agreements, and would have promoted region-wise connectivity and greater trade facilitation. It goes without saying that seamless trade and transit connectivity in South Asia will also allow regional countries to improve opportunities of linking up with markets of South-East, East, and Central Asia. This will promote inter-region and South-South trade, investment and people-to-people connectivity. SAARC countries are poised to reap significant gains from this type of wider transport linkages. Addressing South Asian food security As one will perhaps recall, the Agreement on Establishing the SAARC Food Bank was first signed in 2007 in New Delhi. As it stands, till now operationalisation of the food bank has proved to be rather difficult. True, the food reserve is proposed to be raised from the earlier 243 thousand tonnes to 486 thousand tonnes. However, as is known, at the time of rice price hike during 2007-08, countries like Bangladesh facing acute food shortages were not able to take advantage of the Bank. Uncertainties remained as to how contributions to the Bank are to be made, how the triggers for its activation will work and the manner in which reserves will be maintained. In a welcome development though, the Addu Declaration, in Article 9, commits to resolve the operational issues related to the Food Bank before the next Session of the Council of Ministers in 2012 with a view to ensuring its effective functioning. As was noted, an Agreement on SAARC Seed Bank (SSB) was signed in Addu. Hopefully, this will enhance collaboration among the SAARC countries in the important areas of accessing and sharing of seeds from the Seed Bank and in promoting collaboration in the development of high yield varieties of seeds. Effective management of both the SAARC Seed and Food Banks will have to be ensured to allow member countries to reap maximum possible benefits from these potentially highly rewarding initiatives. Besides, it also needs to be appreciated that closer cooperation among agricultural scientists from across the region and exchange of both agri-scientists and technical know-how will be needed to enhance opportunities of yield gains, productivity enhancement and crop diversity which will contribute to food security in the region. Regrettably, the Addu Declaration did not mention the concrete actionable measures in order to follow-up on the Thimphu Statement on Climate Change. Though the Statement itself was rich in its letter and spirit, concrete actions are needed to give substance to this spirit. As is known, various regional groupings such as the ASEAN are pursuing pro-active policies to fight a shifting climate. It was expected that in Addu, SAARC members would commit to some time-bound measures to take the climate change agenda forward. Amongst others, this was particularly important from the perspective of ensuring long term regional food security. Hopefully, in the coming days, we shall see some concrete movements in this area. Fostering people-to-people connectivity The Addu Declaration has come up with some specific and targetted measures to promote people-to-people connectivity, particularly with regard to travel and tourism. The Declaration states that a SAARC Travel and Tourism Fair will be held in the Maldives in 2012 with a view to promoting the global image of the region as ‘Destination South Asia’. As is known, the SAARC Agreement on Trade in Services (SATIS) was signed in 2010. This is likely to create potential opportunities to enhance trade in various services including in tourism services. SATIS will now need to be operationalised through reconciliation of member countries’ offer lists and request lists. To get the most out of the SATIS, and to realise the potentials of intra-regional tourism, member countries should design these lists in a manner that promotes tourism from within the region and also beyond. Particular attention will need to be given to promote connectivity, including air connectivity, and simplifying the visa procedures for facilitating movement of people. China and the issue of observer countries A growing number of countries seeking observer status in SAARC needs to be seen as a sign of the increasing importance and relevance of this regional grouping. Nine countries (including the EU) have sent delegates to the Maldives this year as observers. In a new development, China is reported to have expressed its interest to become a member of the Katmandu-based club. Although there is no official confirmation of such a request, anecdotal information suggests that in the recent past Nepal had advocated for China’s membership. However, India appears to be reluctant to have China as a full-fledged member in the SAARC. Beijing is evincing its keen interest to further shore up its already strong foothold in South Asia. Its exports to the region has seen significant rise over the recent past. China’s trade with India surpassed US$ 50 billion in 2010 (this was less than $5.0 billion in 2001); Indo-China bilateral trade is expected to rocket to $100 billion by 2015. China’s importance as an investor is growing not only in Africa, but also in Asia and it seeks to play a more active role in the region. Any decision regarding China’s inclusion in the SAARC, however, will require careful scrutiny by member countries in view of political, economic and politiconomical interests of the region. As is known, China, India, Bangladesh and Sri Lanka are members of the Asia-Pacific Trade Agreement (APTA). The additional benefits that could potentially originate from China’s entry to the SAARC will, thus, need to be closely examined and assessed. China itself, however, as of now, called for a SAARC-plus one Summit as a start. Institutional strengthening of SAARC The issue of raising the efficacy and effectiveness of SAARC as an institution has been an ongoing agenda from the very beginning of the establishment of SAARC. With SAARC now moving towards the end of its third decade of existence, it is becoming increasingly apparent that much more needs to be done towards institutional strengthening of the SAARC. The Addu Declaration, however, did not come up with any concrete recommendation or commitment to this end. Article 17 makes a general statement by asking member states “to strengthen SAARC mechanism, including the Secretariat and Regional Centres, through an inter-governmental process”. No operational modalities or time-bound mandates have been proposed. The proposition of the Maldives to upgrade the post of the SAARC Secretary General to that of Ministerial rank failed to receive support from some of the key members. The Secretary General of the Association of Southeast Asian Nations (ASEAN) is appointed with the rank and status of a minister. However, there is widespread criticism that despite such a rank, the Secretary General of ASEAN does not have the power to penalise members failing to comply with its directives and measures by way of imposing sanctions; neither does he or she has the power to provide incentives to members with better track record. The lesson here is that even if the proposal by the Maldives received support of other member countries, at some point of time in future, delegation of effective power, along with required operational mandates, will have to be adequately ensured to appropriately strengthen the SAARC as an institution and the SAARC Secretariat as the principal organ of delivery. Concluding remarks The twenty first century is being called the Asian Century. What will be the role and place of SAARC in view of the expected Asian dynamism? SAARC’s future as a regional body requires a reality check in the context of emerging regional and global opportunities, and from the perspective of the issues flagged above. Whilst individual members in the SAARC will need to undertake the necessary initiatives towards structural changes in their respective economies, much will depend on whether they are also actually able to leverage the benefits originating from regional cooperation and take advantage of the synergy emanating from collaborative initiatives in the areas of trade and investment, connectivity, mitigating climate change effects, poverty alleviation and people-to-people contact. SAARC’s lessons from the past will need to be transformed and translated into strengths for the future. As the above discussion bears out, this will require concrete actions in several areas. Indeed, regional cooperation must be seen as a key strategy towards stronger global integration of the SAARC members. The SAARC Secretariat will need to be significantly strengthened if such ambitions are to be realised on the ground. The “Vision Statement”, prepared by the Group of Eminent Persons (GEP) which was constituted as per the decision of the 9th Summit in the Maldives, back in 1997, had provided a roadmap for South Asian integration. This roadmap envisioned a journey that would take South Asia through a path of graduation from preferential trading arrangement (PTA) to free trade area (FTA) to Customs Union (CU) to common market (CM) and then to an Economic Union (EU), by 2020. To be true, when the issue of accessing the potential benefits of regional cooperation is considered, pace is everything. By any measure, the GEP vision is rather ambitious and the timeline has been missed already. However, SAARC members and leaders ought to accelerate the current pace of collaboration through concrete steps so that not only India, but also the other SAARC countries can emerge as formidable drivers and beneficiaries of the much-hyped Asian Century. Without belittling what has been achieved at the 17th SAARC Summit, one has to acknowledge that if South Asia is to be an integral part of the Asian Journey of this young century, its leaders must act on going beyond rhetoric.