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The South Asian Association for regional Cooperation (SAARC) was established on 8 December 1985 when the government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka formally adopted its charter providing for the promotion of economic and social progress, cultural development within the South Asia region and also for friendship and cooperation with other developing countries. The basic principles as envisaged in SAARC are sovereign equality, territorial integrity, political independence, non-interference in internal affairs of other states and mutual benefit. All decisions within this regional setting are to be taken on the basis of consensus. Till date 11 summit meetings of the heads have taken place-Dhaka (1985), Bangalore (1986), Kathmandu (1987), Islamabad (1988), Male (1990), Colombo (1991), Dhaka (1993), New Delhi (1995), Colombo (1998) and Kathmandu (2002). SAARC functions on the basis of the following formal institutions: The Council of Ministers, responsible for formulating policies and deciding on new areas of cooperation. Standing Committee comprising foreign secretaries of member states with the task of monitoring and coordination. The programming Committee consisting of senior officials scrutinizing the secretarial budget, assists the Standing committee. The Technical Committee formulates specialized programmes in their respective fields under the SAARC Integrated Programme of Action (SIPA).SIPA is the core of SAARCs work programme reflected in the technical committee. The seven technical committees under the SIPA cover are-a)agricultural and rural development; b) communications and transport; c) social development; d) environment, meteorology and forestry; e) science and technology; f) human resources development; and g) energy. Specialized Ministerial Meetings which focus on specific areas of concern like international economic issues, children, womens issues, environment, poverty alleviation, youth, disabled, housing, agriculture, trade, tourism and culture. SAARC has identified certain areas on which collective positions could be projected and promoted in international forums. According to its Charter , acceleration of economic growth, social progress and cultural development in the region ,promotion of active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields and strengthening of cooperation among the member states in international for a on matters of common interest are some of its main objectives.
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While social issues are one of the main areas of cooperation focusing on issues of child development, health, and women, SAARCs accent is on economic cooperation and growth among developing countries. With this in view, SAARC initiated since 1991 several measures such as an extensive study on Trade Manufactures and Services(TMS);setting up the Committee on Economic Cooperation (CEC) to oversee implementation of measures and policies to enhance trade economic relations between member states; the adoption of the SAARC Preferential Trading Arrangement (SAPTA)-signed on 11 April 1993 which came into force on 7 December 1995-leading to trade negotiations, depending tariff concessions and steps towards evolving the South Asia Free Trade Area (SAFTA) to further liberalize trade within the region. These apart, SAARC has initiated a few unprecedented initiatives to devise common strategies in the international for such as the World Trade Organization (WTO), for ensuring a nondiscriminatory world trade regime. Also SAARC members have renewed their commitment to encourage participation of private sector and to organize trade-fairs to promote intra-SAARC trade and organized tourism. Notwithstanding these positive developments, the SAARC is riddled with problems, which are somewhat typical to this regional setting. For one, the long-drawn political-diplomatic wrangle between India and Pakistan over an array of issues has slowed the pace of the SAARC integration process. Furthermore, the disparate level, of the regions economies also has considerably affected priorities of these countries in the global trade regime. Trade in South Asia is an ancient activity, both within and beyond. South Asia consists of seven countries namely, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka. South Asian countries, officially known as SAARC countries contain about just over a fifth (21.7%) of the world population, but earns a mere one-sixtieth (1.65%) of the world GNP. South Asian share of the worlds imports and exports are even smaller, namely a little over oneeightieth (1.2%) of world imports and about one-hundredth (0.98%) of world exports. It is noteworthy that while world exports grew about 50.4 percent during a six year period (1994-99), SAARCs exports to the world grew significantly more, about 80 percent over 1994-99. During the same period world imports grew 48.9 percent while SAARCs imports from the world grew 85.8 percent. It shows, overall, that SAARC as a region has been gradually integrating with the world trade, nibbling at a slightly larger share of both the global exports and imports.

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In South Asia, both exports and imports have been growing during all the past three decades, so that the overall trend is positive. In Intra-SAARC flows of trade, India dominates exports while Bangladesh dominates imports. It is seen that the imbalances between exports sent and exports received increased over the years, as Pakistan and India reduced their imports from SAARC as a percentage of Intra-SAARC exports and still more as a percentage of their global imports, while Bangladesh did the opposite. It is important to note that Bhutan and Maldives are very small and their trades do not affect the overall picture of SAARC trade materially at all. India has consistently shied away from the much desired task of importing from her neighbors, so that India's imports from SAARC remained far less than one percent of her global imports. The enthusiasm with which Bangladesh and some other South Asian countries have opened their markets to SAARC exporters need to be reciprocated by India and Pakistan. Unless India and Pakistan take the necessary steps to reverse the trend by encouraging Intra-regional imports, the regional trade performance would not improve. The process of economic integration in South Asia gathered momentum with the implementation of the SAARC Preferential Trading Arrangement (SAPTA) in 1995, which lay the foundation for cooperation in trade. Basic Principles of SAPTA are: overall reciprocity and mutuality of advantages, step-by-step negotiations and periodic reviews so as to improve and extend the preferential trade arrangements in successive stages, inclusion of all products, raw, semi-processed and processed and special and favorable treatment to Least Developed Countries (LDCs). Three rounds of Trade negotiations have so far been completed under SAPTA and tariff concessions have been extended to 5550 products. It may appear that India and the Maldives have offered concessions on a very large number of products (1917 and 368 respectively) compared to other nations in the third round. However, it may be noted, for example, that India has offered concessions on 84 kinds of fish and 26 kinds of meat, thus having given 110 products under concession that could have been simply counted as two items. Bangladesh, being a net importer of these 110 items, has no capacity to export these. Maldives has offered concession on 197 kinds of forest products (wood and leaves etc.), 60 kinds of leather bags etc., 32 kinds of fats of animals/vegetables, 20 kinds of shoes, 16 kinds of umbrellas, 17 kinds of foam products and 12 kinds of hats. The products of major export interest of Bangladesh did not get much support in this round. Again, India gave concessions of 28 items to Bangladesh in the Third Round. Out of these 28 items, Bangladesh is a net importer of 20 so that the concessions mean practically nothing useful in
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promoting exports. However, India is a net exporter of these items too. Her imports in these categories are marginal, leaving basically no room for Bangladesh to expand exports to India in these categories even without tariff, Para-tariff and non-tariff barriers. The export performance of Bangladesh under SAPTA agreement thus shows little change. It is worth mentioning that Bangladesh has a very narrow export base, only 3 top commodities like Ready Made Garments (RMG), Frozen Fish and Knit clothes making up over 80 percent of the exports in 1998-99. The RMG exports face uncertainties in 2005 with the withdrawal of quota and other special privileges. Shrimps invariably face the problem of disease, which persists for a long time and calls for alternative technology in their culture. Consideration should there for be seriously given to diversification of exports. Old commodities like jute, specialized textiles and leather should receive renewed attention. It is also noticed that the export intensity of Bangladesh's trade with SAARC countries is low except for Nepal. That is to say the proportion of exports by Bangladesh to Nepal, for example, exceed Nepal's share of imports in total (net) world imports.On the other hand, the spread of commodities is much wider in case of imports compared to exports. It takes 19 commodities to make up for 80 percent of the total imports . The import intensity index exceeds unity in the case of India, Pakistan and Sri Lanka indicating over representation of share of imports from these countries. The share of imports from Nepal is also over represented in most years. The import intensity index of Bangladesh's trade with India shows a strong upward trend indicating growing importance of India in our import trade. Besides the import intensity index of Bangladesh is much higher relative to the export intensity index in the case of India. It shows that Bangladesh's relative share in India's exports is important while India's share in Bangladesh's exports is relatively unimportant. India is the biggest market and trading partner in South Asia. Trade turnover between Bangladesh and India is in favor of the latter. India imports goods worth only $60 million from Bangladesh as against its exports of goods worth one billion US dollars annually to the latter. The yawning trade gap is estimated at around $ 2 billion annually if the unofficial trade ( which is around US $ 1 billion) is accounted for. The quantum of export from Bangladesh is only five per-cent of the total official trade between the two countries. Bangladesh has been suffering from chronic trade imbalance with India. It has been increasing over the years. Bangladesh and India can gain by increasing trade volume. This is possible if both the governments take three major steps. First of all, remove all non-tariff barriers such as quantitative restrictions and countervailing tax imposed by India.
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Secondly, smuggling should be discouraged. Bangladesh and India will continue to lose if smuggling is not checked jointly. Thirdly, the real remedy lies in opening the Indian market to Bangladesh and other smaller economies of the region to improve trade balance among the neighbors. Despite the implementation of SAPTA, however, regional trade integration remains very limited in South Asia. Intra-SAARC trade which was around 3 percent in the early 1990s, has increased marginally to around 4 percent in the late 1990s. A cool and dispassionate analysis would show that the South Asian trade is still beset with plethora of problems - chief among them are tariff and non-tariff barriers. The South Asian Preferential Trading Arrangement (SAPTA) was launched to help the weaker South Asian economies to get easy access to Indian and Pakistani markets through tariffs reduction. India did reduce tariff for a number of items. But the major export items of the neighboring countries like ready make garments, pharmaceuticals, leather products and other value added exportable items were either denied entry into the Indian market or several non-tariff restrictions were imposed on them to protect that market. Restrictive Indian trade policy turned heavily against other SAARC countries resulting in trade imbalance. India is a market of about one billion people. If India opens its market for its neighbors and allows free trade, the gap will be reduced to a considerable length. India is protecting its market by erecting non-tariff barriers flagrantly violating the World Trade Organization's resolution to gradually open the market. But India is reaping full benefits of trade liberalization in smaller South Asian economies without reciprocating. As a consequence, exports from Bangladesh, Nepal, Sri-Lanka, the Maldives and Bhutan to India have been rapidly declining while imports from that country have been rising. The rationale of regionalism or Preferential Trading Arrangement (PTA) entails from the motive of economic benefit from unification among some trading nations. PTA involves trade creation and trade diversion effects - trade creation refers to the replacement of relatively high cost domestic production with lower cost imports from the partner country and hence it is welfare improving. Trade diversion refers to a switch in imports from low cost rest of the world which faces higher tariff, to the high cost partner country which faces lower tariff or zero tariff and hence it is welfare reducing. The welfare effect of preferential trade arrangement depends on the relative magnitudes of trade creation and trade diversion effects. It is said that the gains from regional PTAs are greater for smaller countries like Bangladesh and Nepal and smaller gains accrue to larger countries like India and Pakistan. Thus it would be important for Bangladesh to support and extend the ongoing trade liberalization in
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South Asia. In fact, Intra-regional exports exceed 50 percent of total exports in European Union, APEC and NAFTA. The Intra-regional share is below 25 percent in ASEAN and MERCOSUR while it is only a trickle in countries in SAPTA. The former group of PTAs includes developed countries which mostly trade among themselves while the latter group includes NICs or developing countries which trade mostly with developed countries. Economists argue in favor of global free trade irrespective of market structure. Regional trade liberalization is a second best policy option, the first being global trade liberalization under WTO. The standard economic argument in favor of free trade is that it enhances efficiency and is conducive to development compared to a regime under protection. Free trade allows firms to achieve economies of scale and scope through access to larger markets. It rewards the competent firms and puts constant pressure on them to perform competitively by investing in new technology and in measures to cut costs and improve quality. The argument is that there is no reason to delay the introduction of free trade, because this delays the benefits of greater efficiency. But, the proliferation of PTAs in the 1990s has given rise to the question of whether such arrangements would lead more quickly to global free trade. It is said that the incentive of higher profit to join the PTA expands the PTA facilitating more towards global free trade. Preferential trading arrangements among group of nations are usually a prelude towards the establishment of free trade areas, with the eventual goal of reaching higher levels of economic and political cooperation. Empirical studies indicate that the regional trade liberalization scheme would also bring net benefit to SAARC Countries. Nevertheless, South Asia has already committed itself further to the creation of a South Asian free Trade Area (SAFTA). With the acceptance of the broad goal of transition to a free trade area, the policy issue now boils down to that of the pace of transition to SAFTA. Fast introduction of SAFTA will enable the business community to prepare for the upcoming trade liberalization under the WTO process, especially in view of the upcoming elimination of quota privileges. Secondly, the analysis of informal trade suggests that in respect of imports, Bangladesh already resembles a free trade regime. The exports however remain restricted. FTA would help promoting our exports to the neighboring countries. Thirdly, Bangladesh happens to have installed modern technology in many new areas of production and can therefore hope to compete strongly with south Asian products still relying on old technology. On the other hand, the protectionist camp argues that the benefits of trade liberalization so far have been quite asymmetric. They see alarming evidence of disruption of our old industries. They therefore call
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for a slow and cautious approach to safeguard the interest of the existing domestic producers who face serious threat of competition. This argument is indeed not against free trade as such but against free imports without compensatory free exports. As far as the optimal strategies for transition from SAPTA to SAFTA are concerned, one is to adopt trade opening program which would necessitate some adjustments in the economy e.g., (a) adjustment of the import competing industries and (b) loss of government revenue. In any event SAFTA should create a fund to compensate for the revenue loss of the LDCs. All non-tariff barriers should be identified and they should be withdrawn by a stipulated time frame, say, June 2003. If the immediate gains from free trade are less, the optimal strategy for Bangladesh would be to go for free trade in selected products. Trade Facilitation Measures like establishment, harmonization and mutual recognition of standards, adoption of common tariff nomenclatures and harmonization of customs procedures, valuation methods, etc. have to be considered. The most crucial aspect of formation of SAFTA from Bangladesh perspective is investment cooperation among the countries of the region. A coordinated investment policy should be formulated under SAFTA so that the LDCs are not by-passed and are not turned into a mere hinterland of other member states. Besides, the existing Rules of Origin (ROO) may be slightly modified to continue in the free trade area. Finally, to promote regional trade, some specific measures may be undertaken. These include improving negotiations within SAPTA framework, promoting regional trade as a derivative of global trade, proposing free trade in selected sectors or commodities within SAARC, establishing Joint venture with other SAARC countries, seeking aid from India to support trade, relaxing certificate of origin criteria, bringing foreign exchange remittances under local control, setting up a Foreign Trade Institute (FTI), passing Act on Intellectual Property Rights, introducing a Bill on Restrictive Trade Practices etc.

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SAARC AND ITS DEVELOPMENT SCOPE A report published by GBI Research forecasts a surge of activity within the power markets of member countries from the South Asian Association for Regional Cooperation (SAARC) over the next decade as a variety of infrastructure projects interconnecting regions come to fruition, while installed capacity continues to increase. Current members of SAARC are Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. According to the report by GBI Research, which focuses on Saarc countries in the Indian subcontinent that is, excluding the Maldives and Afghanistan the creation of a network that links power markets between Saarc countries with at least 100 gig watt (GW) capacity is possible by 2020. Currently India is a net importer of power from Bhutan, sourcing around 1.21.4GW to its grid. GBI Research estimates this figure will rise to 5GW by 2020. Further interconnectivity is also expected to arrive in July 2013 as a deal signed between the Bangladeshi government and Indian power trading firm NTPC Vidyut Vyapar Nigam will allow India to import up to 0.5GW from Bangladesh when surplus power is available. In 2013, another 0.5GW of transmission capacity is scheduled to be added through the completion of underwater cables running between Sri Lanka and India. This is expected to rise to 1GW by 2016. Such projects will be much sought after to effectively distribute power across the region as overall generation capacity undergoes significant expansion. On the back of rapid industrialization across the whole region, GBI Research forecasts cumulative installed capacity in the Saarc region to total 505.7GW by 2020, which represents a compound annual growth rate 8.6%. With this level of growth in both capacity and cross-border integration, GBI Research believes over the longer term it will be possible for competition to open up through more participation from private players. Saarc countries have to some extent opened up to private players on the generation side and in India that has also extended to the transmission sector To keep up with the pace of growth of the economies across the Saarc region, GBI Research believes governments need to continue to provide incentives for foreign investment. Through this, the region will be able to develop better infrastructure to provide improved supply reliability and a more competitive market for power.

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SAARC: Towards Greater Connectivity. The South Asian Association for Regional Cooperation (SAARC) is now poised for major change. Para 4 of the Declaration of the 14th Summit held at New Delhi in April 2007, stated: The Heads of State or Government recognized the importance of connectivity . It was vital to first have better connectivity within South Asia and then with the rest of the world. They agreed to improve intraregional connectivity, particularly physical, economic and people-to-people connectivity. They agreed to the vision of a South Asian community, where there was smooth flow of goods, services, peoples, technologies, knowledge, capital, culture and ideas in the region. Indeed the prospects for SAARC are better today than perhaps at any time in its history. Even as some countries are passing through degrees of political transition, each state is faring remarkably well economically with rising GDP growth rates and buoyancy in economic indicators. This potential can be harnessed top remote further growth and to remove socio-economic deprivations through developing greater connectivity in the region and by harmonizing mutual strengths .It is with this aim that the India International Centre (IIC), the Institute of Peace and Conflict Studies (IPCS) and the Konrad Adenauer Foundation (KAF) organized regional conference on SAARC: Towards Greater Connectivity, during January 1516 at New Delhi. The last two decades have seen a steady increase in the process of regional integration across the globe. While SAARC has been in existence for over two decades, its progress has been painstakingly slow despite its several promising summits and declarations. SAARC has been unable to implement its own resolutions owing to a lack of commitment and strong political will, which have prevented the region from making any significant progress. There is growing recognition that to be able to effectively implement these resolutions there is an urgent need to develop both physical and intellectual infrastructure. Intensifying cooperation between countries and creating a viable regional organization can facilitate peace, stability, and progress. Such an organization will guarantee. This has been the experience in Europe where European integration, a single market and common currency have enabled countries in the region overcome narrow nationalisms of former times. The European Union is the quintessential model of regional integration, adequately equipped to counter challenges of globalization. Even though this model cannot be transplanted everywhere, it has valuable lessons to offer. In an increasingly globalizing world, it is encouraging to see efforts to promote regional integration receive greater support in Asia, Latin America, and Africa.

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Connectivity is not a narrow idea and should be perceived as a key to regional development. As a way forward, it includes much more that issues including travel. Intra-regional travel fares need to be standardized and more intense dialogues are required with regard to SAPTA and SAFTA. Since last summit meeting, certain unfortunate incidents have taken place in the region to disturb the pace of integration. The region has to overcome these problems. Connectivity is a vital imperative for South Asias future and its acceptance at the highest political levels will be an essential component in the regions development. At the last summit, the Indian Prime Minister, Dr. Manmohan Singh, had expressed Indias readiness to accept asymmetrical responsibility, specifically through SAFTA, through which India was willing to open its markets to states categorized as Least Developed Countries (LDCs), without insisting on reciprocity. Indias aviation policy already allows the Sri Lankan Airlines to enjoy extensive landing rights in India the largest network of air links made available to any airline by a country. This constitutes a practical measure of asymmetrical responsibility which boosts connectivity in several fields including tourism, corporate activity, and people-to-people interaction. More intense dialogues are required with regard to SAPTA and SAFTA. The danger inherent in a move towards greater regional connectivity however, is a spurt in terrorist activity that is bound to have a global as well as regional impact. Terrorism has developed its own deadly, insidious connectivity across South Asia and beyond and needs to be firmly confronted. To this end, effective measures to implement relevant provisions of SAARC Conventions against terrorism, arms smuggling, narcotics trade, human trafficking, and illegal financial transactions need to be developed. Despite its diversity and potential South Asia cannot develop in isolation. Recognizing this, the last SAARC summit invited as observers China, Iran, Japan, the European Union, the Republic of Korea, and the United States. SAARC has also had economic links, even though limited with ASEAN, Canada, the European Union and Japan, as well as collaboration with several UN agencies. The SAARC Declaration on Climate Change adopted at the 29th Session of the Council of Ministers last month paved the way for developing future responses in respect of global issues such as those before the World Trade Organization and other multilateral bodies. SAARC has already resolved to work in collaboration with international agencies in the crucial areas of water resources and flood control, energy, food supplies, and the environment. There is an urgent need to expand South Asian cooperation and connectivity beyond the realm of the state. There has been increased activity and cooperation among South Asias non-state actors
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the corporate sector, professional associations, civil society, media, cultural groups, and Track II processes. The corporate sector, for example, through the SAARC Chambers of Commerce and Industry (SCCI), provides practical inputs to the process of regional trade facilitation. In addition, there have developed profitable relations among various national chambers. A notable initiative extending beyond the region has been the establishment of the South Asia-China Economic Forum. However, the Track II recommendations need to interact more directly with state mechanisms and develop institutional connectivity with them. The SAFTA process is in full swing, the tariff liberalization program under it has been launched, notifications sent, and the final procedures of making Afghanistan a member of SAFTA are expected to be completed by March 2008. Indias commitment under SAFTA was to reduce import duties on a large number of items, for the Least Developed Countries (LDCs) in the region by 1 January 2009. The schedule has been advanced and on 1 January 2008 India issued notification that it was slashing import duties to zero on 4537 items for Bangladesh, Maldives, Nepal, Bhutan, and Afghanistan. However, the list of sensitive items numbering 744, dominated by items of agriculture and textile, will remain in place. The review of this list has been mandated by the Prime Minister, especially for the five LDCs in the region. Though SAFTA is chiefly concerned with tariff liberalization, there are a large number of non-tariff barriers which in effect negate tariff liberalization. A task force constituted by the Ministry of Commerce examined each of the nontariff barriers believed to be existing in India. A series of reviews revealed that while some of these could not be categorized as non-tariff barriers, others were merely problems related to procedures and lack of transparency. With regard to Indias insistence on\ testing products within the country, it has been decided that for a large number of products in textile and food processing, there will be no insistence on testing in Indian laboratories. Testing conducted in any accredited laboratory in any of the SAARC countries will be accepted for purposes of import. A review of all the nontariff barriers shows that Indias certification procedures are non-transparent and convoluted, leading to import constraints. This is the main concern and fear of other SAARC countries. But the process has started with textile and food processing in Bangladesh, and cement in Pakistan. There is need for a giant leap from border trade to trade at border, for which Indias security and economic systems are not prepared. It is essential to look at the borders as connectors. Pending this paradigm shift, 13 locations on Indias border have been identified that require infrastructural up gradation, to promote expansion of trade. The 13 land customs stations
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are: Wagah on the Indo-Pakistan border; seven on the Indo-Bangladesh border (Petrapole being the most important); four on the Indo-Nepal border (Raksaul being the most important); and Moore on the Indo- Myanmar border. It is a Government of India project with an estimated cost of 853 crore rupees that aims at upgrading infrastructure in terms of connectivity and creating an integrated check-post, integrating immigration, customs, testing and other activities associated with trade. A major consequence of not having proper infrastructure at these borders is that legal trade fades into insignificance and illegal/ informal trade comes into the foreground. India is also engaged in diplomatic efforts with Bangladesh and Myanmar for opening up of additional land customs stations. The priority however, is to develop modern infrastructure for trade at the border. Trade is pass and investment is the new buzzword. It is important to understand that the driver of economic integration everywhere is investments, particularly in South Asia, as investments are the only way by which Indias neighbors can hope to manage trade deficits with India. The neighboring countries fear that liberalizing trade with India will lead to swamping of their markets with goods from India. This fear can be mitigated only if Indian investment takes root in these countries and if in return India reduces barriers to investments from its neighbors. For ten years India had refused any Foreign Direct Investment (FDI) from Sri Lanka, Bangladesh, and Pakistan. Of these, only barriers on investment from Sri Lanka and Bangladesh have been removed. It is in Indias interest to remove FDI restrictions on Pakistan, as this will strengthen the formers plea for investment liberalization because the next phase of SAFTA addresses issues of services and investment, where India needs to have a strong moral position. Regarding infrastructure, especially road and rail, a number of steps have been taken, particularly in relation to Pakistan. Considerable progress has been made on the integration of road services, with several other proposals by India to Pakistan including Kargil-Skardu and Jammu-Sialkote routes; and to Bangladesh for Agartala-Dhaka and Shillong-Silhet routes. There has been progress on the question of rail links as well and the proposal for a Kolkata to Dhaka railway line is under consideration. Revival, up gradation and modernization of old rail and road links that existed in the region is also essential. Bilateral initiatives also have a bearing on the entire region. Negotiations between India and Sri Lanka to convert the free trade agreement into an agreement for comprehensive economic partnership are in their final stages. The FDI initiative with Bangladesh is also important and India is encouraging imports from Bangladesh. Cement is a major commodity that India imports from Pakistan. With respect to Pakistan trade across LoC
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trade is significant because any confidence building measure between India and Pakistan has multiplier effects for the entire region. In terms of volume of trade, South Asia is a blip on Indias radar screen and Indias globalization is not sustainable without partnership in the region. There are success stories of regional economic cooperation, like the Bhutan-India cooperation on power, which can be replicated in Nepal. Indias Sittwe project in Myanmar will have a significant bearing on South Asia as it would mean increased connectivity of Indias Northeast not only with the rest of the country, but importantly even South East Asia.. Such efforts towards sub-regional cooperation will help obviate the suspicion with which neighboring countries have regarded India in the past. India is willing to be proactive and work unilaterally to dismantle barriers and emerge as a major importer in the region. SAARC is at a critical juncture and it is important to understand its uniqueness in terms of the common historic legacies and cultural commonality of its members. Its developmental challenges are unique and hence it is unfair to compare SAARC with other regional organization. The theme of the 14th SAARC summit was connectivity. In this context, certain key areas were identified: economic and trade, culture, poverty alleviation, and physical infrastructure. Since the summit, there have been four ministerial meetings organized to focus on areas of physical, financial, and security connectivity.. In the first meeting of the transport ministers in August 2007, the ADB-funded multi-moder transport study was analyzed. ADB identified various road, rail, aviation, and inland water corridors to strengthen intra-SAARC linkages. India proposed a draft regional motor vehicle agreement, and will also circulate a Regional Railways Agreement for Goods, Services and People, for consideration by the SAARC member states. At the finance ministers meeting in September 2007, there was a call for an urgent finalization of the SAARC Development Fund (SDF), which will be an umbrella institution for sub-regional and regional projects, and will have social, infrastructural and economic windows. India has already committed 100 million dollars to the social window of the fund, apart from its assessed contribution of about 90 million dollars. The negotiations for the SDF have been finalized, projects identified, and it is currently functioning out of a temporary cell in Katmandu. Two important projects on maternity and child health care including immunization, and women empowerment, especially for home-based workers, are slated to start shortly. Efforts are on to identify other sub-regional projects to be funded by the SDF. The home ministers met in October 2007 and discussed security issues in terms of strengthening hardware and software of infrastructure between the SAARC members,
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including formation of the Conference of Police Chiefs of SAARC members. India has offered electronic networking of the terrorist monitoring desk and the desk on narcotics and drugs (both based in Sri Lanka) and upgrading their physical infrastructure to enable better informationsharing. Negotiations on the draft on mutual legal assistance on criminal matters are expected to be finalized in the next meeting in April 2008 in Sri Lanka. This will be the first enabling regional framework on security to ensure cooperation in sharing and exchange of information on monitoring criminal and anti-national activities. A meeting of the heads of the National Coordination Committee on the SAARC Social Charter was held in September 2007 where the issue of poverty alleviation among others, was discussed. Sub-regional projects on women, geriatric care, natural disasters, youth, food, water, and environment were also developed. Programs relating to capacity building and exchange of best practices are already underway. The first meeting of the regional task force on trafficking of women and children was held in New Delhi in July 2007, where it was decided to have a uniform toll free number for victims and a standard operating protocol negotiated by the SAARC member states to punish offenders. The standard operating protocol has already been finalized by India, and the toll free number is being hyperlinked to the SAARC member states for their connectivity. India has also offered to initiate a telemedicine project in healthcare with the first phase starting in Bhutan, under which, superspecialty hospitals from India will be linked to Bhutan and gradually all other SAARC members will be well-connected. The names of three persons for the post of the interim CEO of the South Asian University to be located in Delhi have been short listed and put before the intergovernmental steering committee for approval. Work on the university is expected to start by 2009. The Agreement on the SAARC Food Bank, signed at the summit, which ensures that the SAARC member states are able to draw food grains during emergency,, will become operational upon ratification. Regarding the issues, certain foggy areas were identified by the heads of governments food, water, energy and environment. India has approved a program of solar rural electrification -- electrification of one village in each SAARC country through solar power, along with rural roads and capacity-building measures for maintenance. In addition, projects on rain water harvesting, ground water maintenance, capacity-building and training programs in the areas of power, improved nitrogen-fixation though a regional workshop of the eight countries, increasing the nutritional value of food for the underprivileged and shuttle breeding programs will soon commence. The Technical Committee on Agriculture, in a meeting
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held in New Delhi, decided to operationally a SAARC milk-grid in the region through a process of public-private partnership. SAARC member states expressed their willingness to address the problem of overbureaucratization within their countries. To rationalize and streamline institutional mechanisms to ensure that the organizations activities and meetings prove useful, it was decided to dovetail feeder meetings to ministerial meetings, and prune mechanisms that have outlived their purpose. Conscious of the fact that SAARC is a people-driven process, India, has committed to institutionalize greater people- interaction within SAARC. To this end, a SAARC bands function, food festival, pilot-student exchange programs (both at school and university levels), and folk arts theatre festival were organized, and the SAARC museum of textile with a sales outlet was set up. These witnessed tremendous response and participation from all members states, even from their remote areas. The Surajkund Mela and the India International Trade Fair saw an enthusiastic participation by SAARC members. There has been a growing international interest in SAARC. So far SAARC has had seven observers: the European Union, United States, China, Japan, Korea, Iran, and Mauritius. Australia has expressed interest and its application is being considered.

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SAARC ITS HISTORICAL PERSPECTIVE AND PROSPECTS As the ambit of SAARCs influence grows, it will have to develop a mechanism to allow for cooperation of its observers and fine-tune their activities within it. SAARC also has MoUs with various international organizations on a case-by-case, project basis. The forthcoming Ministerial Meetings in 2008 include the SAFTA Council of Ministers, to be held in February-March 2008. Preceding meetings on trade and services and non-tariff measures will also be held. The meeting of the ministers on poverty alleviation is scheduled for February 2008, along with meetings of ministers of health, transport and agriculture during the year. Sri Lanka will host the next summit in Colombo. Barriers have certainly been broken but it is essential that the bureaucracy also shares the same vision as the Ministers. How is Indias physical infrastructure being linked with China? China plans to bring a rail link up to Kathmandu. Does India plan to extend its rail network to Kathmandu? Can the Stillwell road be extended to Bangladesh to promote mutually- beneficial outcomes? There is a huge gap between policy level decisions and their implementation. Investment is very important and South Asian countries need to create increased trade opportunities and export potential amongst themselves. The SAARC Investment Treaty will be of utmost importance in this respect. Are there any plans of the Indian government to provide investment incentives in other countries which can stimulate intra-regional investment? There is surplus energy in Indias Northeast. Is India considering export of energy to the north east side of Bangladesh? What is the current security concerns regarding investment from Bangladesh? Does the opening of the Sittwe port offer only commercial connectivity or does it have strategic implications as well? Most countries suffer from internal instabilities. Greater democracy and huge investment opportunity creation will prove advantageous for the region. Border infrastructural development has remained neglected. The border between India and Nepal is a hub of criminal and illegal activities. The way out is collaboration between the two governments to make it a point of connection rather than point of difficulty. Security agencies are not opposed to building infrastructure at the border areas. There is a vision, capacity and requirement for the same. So where does the problem lie?
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There have been no initiatives on any of the major rivers between Nepal and India. Sittwe is being perceived as our Gwadar in the east. In the case of the Ledo-Stillwell road, the Chinese have done their bit. Security however, must not hamper trade and development efforts between countries. The citizens of member states continue to remain skeptical about the future of SAARC. How can civil society be mobilized to support these efforts? Unless a liberal or no-visa regime is adopted, achieving connectivity in South Asia will remain unachievable. There is a lot of interest in the Northeast, but there are doubts within the security establishment, whether it would be wise to reopen the Stillwell road. There is considerable hesitation on Indias part because security concerns are yet to be addressed. The infrastructure on the Chinese side is visibly superior, evident in the Chinese side of Nathu la. Hence, the challenge for India is to improve infrastructure on the designated points of trade on its side and then initiate discussion about connectivity of this infrastructure with the Chinese side. Sittwe is not only an economic proposition but also has strategic implications which are not aimed at Bangladesh. It is an important flag marker for India in Myanmar and provides access to the Northeast. Trade within South Asia and Indias exports to South Asia has both increased significantly, but imports have not improved impressively, fuelling suspicion in neighboring countries. With regard to Nepal, India is investing in Raksaul, Jogbani, Sanauli, and Nepalganj roads. In addition, rail links for Katihar-Jogbani-Biratnagar, Gonda- Nepalganj, and New JalpaiguriKakarpita are being laid out. But it is the power sector that will transform the relationship between India and Nepal. There is no harm in allowing the private sector to take the power initiative forward. The private sector in India can also collaborate in development projects with neighboring countries. Scepticism regarding SAARC is only limited to New Delhi. People with greater economic stakes and even state governments possess greater desire for economic cooperation and integration with the neighboring countries. In the border areas only the Government has the capacity to undertake risks for making investments in infrastructure. The single-most important factor holding India back is the fear that opening up its borders will flood its markets with Goods from China.

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Many of the economic projects in the Northeast will make sense if Bangladesh is brought into the picture, which as of now, given the bilateral relations between the India and Bangladesh, seem unlikely. The proposal of India providing incentives to its private investors to invest in neighboring countries is worth considering. In the case of SEPA, fears exist on the Sri Lankan side. These are not irrational fears; but the same fears that India has vis- vis China or Singapore. It is natural to worry about whether opening up their services sector will cause their own professionals to become unemployed. The SAARC Regional Agreement of Promotion and Protection of Investments is in the final stage of negotiations. A SAARC visa scheme is already in place. The problem of a visa-free scheme for certain categories of people like businessmen, academics, journalists, writers, sportspersons, senior government officials and politicians, and visa liberalization schemes for various other categories was also discussed with the Council of Ministers in December 2007. There are many issues affecting greater cooperation and connectivity among South Asian nations. Lack of physical infrastructure tops the list. Being a region with one of the highest growth rates in the world, the demand for infrastructure has swollen dramatically, touching $90100 billion per annum. It is not feasible for one country alone to meet these changing needs Therefore, it becomes imperative for all SAARC members to complement each other's growth efforts. Given this scenario, experts in South Asia and the Asian Development Bank have proposed a number of transport corridors. Among the important ones proposed are Lahore-Delhi-KolkataPetrapole-Benapole-Dhaka-Akhaura-Agartala (2,453 km), Kathmandu-Nepalganj-Delhi-LahoreKarachi (2,643 km), Kathmandu-Birgunj- Kolkata-Haldia (1323 km), and ThimpuPhuentsholing-Jaigon-Kolkata-Haldia (1,039 km). Two priority routes have also been identified in the Asian Highway network touching upon South Asia. While one route connects Iran, Afghanistan, Pakistan, India, Bangladesh, Myanmar, Thailand, and Vietnam; the other route links Iran, Pakistan, India, Nepal, Bangladesh, and Myanmar.

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On the question of rail links, there is a proposal for a Colombo-Chennai rail corridor (1,025 km). Also, the railways of India and Bangladesh can be brought under the Trans-Asian Railways which consists of the railway systems of Pakistan, India, and Bangladesh. Water transport too can bring the countries of the region closer. Ganga, Brahmaputra, and Meghna waterways can be integrated with the sea ports in India and Bangladesh. Ferry service between Colombo and Kochin, and Colombo and Tuticorin should be established. Tourism will receive a great boost if the airports in Nepal and Bhutan are upgraded. Male-New Delhi and New Delhi-Islamabad air services should also be started. The 14th SAARC Summit focused on developing economic, social, cultural, and physical infrastructure to promote intra-regional trade, encourage regional investment, and greater people mobility in the region. Pilot projects for improving connectivity including a multi-state road transportation system and direct air links to all capitals were also agreed upon by the member countries. Establishment of the South Asian Free Trade Agreement (SAFTA) in 2006 necessitates the development of linkages to help expand intra and inter-regional trade. Efforts must also be made to open the regions fragmented economies to other economies in the region as well as to the adjoining regions of North East Asia, Central Asia, and South East Asia. This will be a real movement towards greater Asian economic integration. The SAARC Regional Multi-model Transport Study (SRMTS) established in 2004 has given important suggestions to promote regional connectivity. Earlier, regional cooperation in the development of land transport infrastructure in Asia was promoted by the United Nations Economic & Social Council for Asia & Pacific (ESCAP) to stimulate growth and facilitate exchanges among people. SAARC can learn a great deal from ESCAPs projects. SAARC observer countries with much better infrastructure than the SAARC nations must also cooperate extensively in this regard. The South Asian Free Trade Area (SAFTA) was envisaged to be a step forward from the SAARC Preferential Trading Arrangement (SAPTA). It is common knowledge that negotiations under SAPTA were not very effective. In spite of SAPTA and the increasing integration of South Asian economies, in terms of intraregional trade cooperation, South Asia continued to be one of the least successful regions in the world. Lack of adequate transit facilities for SAARC members within the region had severely limited trade flows within the SAARC, affecting SAPTA.
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However, it should also be taken into account that the size of informal intraregional trade in South Asia continued to be quite significant, particularly between India and Bangladesh (estimated variously to be in the range of $ 2-3 billion). SAFTA was thus expected to be only a step, albeit an important one, towards an integrated South Asian economy based on comparative advantage-driven economic cooperation. Such an economic entity was also envisaged as a strategic bloc that would facilitate global integration of the regional countries. From Bangladeshs perspective, the extent of benefits that the country can draw from Rats such as SAFTA, will depend crucially on its capacity to (a) promote export diversification, (b) enhance productivity, and (c) strengthen export competitiveness. A number of issues which strained trade relations between India and Bangladesh (like the dry-cell batteries issue, restriction on cement export) have now been resolved to Bangladeshs satisfaction. On its part, India has also been seeking some facilities from Bangladesh (port of call at Ashuganj, transportation of equipments through Bangladesh). The litmus test of the effectiveness of SAFTA will be its ability to ensure greater volume of intra-regional trade and, to a certain extent, reduced trade deficits between partner countries through comprehensive efforts. South Asian countries cannot hope to reap the full benefits of globalization without some degree of regionalization of their economies. It is also necessary to distinguish between necessary and sufficient conditions for regional cooperation and/or integration to succeed. Necessary conditions are those without which the desired outcome will not be achieved, no matter what else happens. Sufficient conditions are those conditions alone that ensure the outcome by being present. The operational dynamics of India-Bangladesh and India-Nepal trade clearly demonstrate the fact that 10-15 percent of the product costs are logistics-related. Hence, gains in logistics efficiency will be reflected in lower prices and overall welfare gains. A key factor, often not recognized, is that logistical efficiency is a function of networks. The better the network, the higher the efficiency. This applies particularly to transport logistics. Unless we learn to view transport as a network, it is unlikely that we will achieve maximum logistical efficiencies. These networks are missing between the countries of South Asia. The question is how to rebuild old networks. This is where regional cooperation becomes important. A central objective must be to view sub-regions as areas where transport networks can be treated as though national boundaries existed only for the purpose of levying customs duties. For all other purposes, the subregion should be treated as if there were no borders. This is what will make the circulation of goods possible at a cheaper rate and lead to the formation of
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production clusters. This springs directly from the fact that transport, in addition to reflecting a variety of different types of products and services, also has a spatial dimension. It is worth considering if state highways serving important land customs routes, should be declared national highways. Further, all national highways serving these routes should be upgraded to four lanes and declared as international corridors. Most crucially, regional cooperation creates regional public goods that have an impact across borders within the region. There should be focus on health infrastructure. Pro-poor growth should be promoted in the form of rural industrialization, rural education etc. of short-term or occasional training institutes for the exchange of such expertise should be considered. Trade issues are dependent on visa issues. And visa processes are so cumbersome that it becomes difficult for people to interact with each other. Linking extraneous political issues to economic issues is wrong. Economic issues should be considered on their merit alone. Energy security is important for Bangladesh, but it also has some strategic concerns. While a deal with the Tatas can be struck, concerns over investment will continue to bother Bangladesh. The twelfth SAARC Summit set up a specialized Working Group on Energy (WORGEN) to undertake a study of various possibilities of cooperation in the field of energy, including the idea of an Energy Ring that would include trans-national energy lines for trade in electricity, gas, and oil. A meeting of SAARC Energy Ministers the first of its kind, was held in Islamabad in 2005. A SAARC Energy Centre was established in Islamabad in March 2006. The thirteenth SAARC Summit also constituted a South Asian Energy Dialogue involving officials, experts, academics, environmentalists, and NGOs to undertake an in-depth study of the issues and make recommendations. Development of clean and renewable energy deserves to receive high priority in South Asia. Exploitation of renewable sources of energy will greatly relieve pressure on member countries dependant on fossil fuels. This will significantly contribute to meeting concerns of climate change and deforestation due to logging and wood-fuel consumption. As for hydro-power, member states need to pay utmost attention to effectively address concerns regarding its adverse environmental impact and rehabilitation of affected persons.

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Development and promotion of non-conventional energy resources could be another priority area. Solar energy can also be explored further if cost reduction can be brought about through an integrated energy market. High-priority must be accorded to considering the development of external linkages with countries beyond the region, in the neighborhood, like Myanmar, Iran, and Central Asia, which possess immense exportable surplus of energy. An important challenge before the SAARC member states is to universalize access to electricity by developing a cooperative energy mega-project, beneficial to all member-states. This in turn will provide stimulus for developing cooperative projects in other sectors and help build trust and confidence among its peoples. Capita income in the world. With a share of 20% in the global population, the region only has a 0.6% share in global oil reserves. All the countries in the region are net importers of oil. India however, ranks among the top ten exporting countries and is the net exporter of refined petroleum products. However the irony of the matter is that UAE and Singapore are the topmost importers of the Indian petroleum products and the biggest exporters of petroleum products to Pakistan and Bangladesh. It is the absence of proper links between India and Pakistan, and Bangladesh, that such trade is thwarted. Even natural gas consumption is very limited in the region primarily due to the lack of infrastructure like gas pipelines. Therefore, to meet the regions energy demands, major gas pipelines like the Iran-Pakistan-India (IPI) pipeline, Turkmenistan- Afghanistan-Pakistan, and the Myanmar-Bangladesh-India pipeline were envisaged. India was very keen on the latter, because some investments have already been made in Myanmar, but these plans have not been realized. India has some major concerns with regard to the IPI pipeline. If Pakistan, for instance stops the gas supply, it could have significant implications for Indias energy security. My view is that such concerns can be mitigated if the pipeline is made into a regional grid. It then becomes a regional issue where Pakistan will be more careful in affecting the functioning of the pipeline. The same logic can be applied to other pipeline projects as well. The bane that affects South Asia is a lack of cooperation. There is therefore a need for a mega project wherein all countries in South Asia can cooperate with each other. It can be either a natural gas energy project or a hydroelectric power project. With regard to Bangladeshs natural gas reserves, we need some organization to accurately gauge the reserves.

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Without the establishment of a SAARC grid, it would be impossible for us to cooperate with other regions. India needs to unilaterally take the initiative for wind energy projects, given its technology and expertise in the area. It also needs to seek expertise from other counties for energy transmission and distribution. The need for India in particular is to reform its electricity trade. How do we do that? The IPI gas pipeline is a dismal story of cooperation. Differences between India and Pakistan have held back any forward movement on the issue. The pipeline constitutes an important building block for a good relationship with Pakistan. The offer from Pakistan was part and parcel of the foreign capital investment that the Benazir Bhutto government was able to secure from the United States. The offer was made in anticipation of the realization of that investment. Unfortunately, the Bhutto government fell and the next government led by Nawaz Sharif did not pursue it further. The suggestion to measure gas reserves of Bangladesh holds promise. If we are able to prove to the people the benefits of cooperation, it will trigger off a mechanism for cooperation. People who doubt the possibility of cooperation always try to sabotage it. For instance, in 1998 great apprehensions were raised about the Kolkatta- Dhaka bus service. Ten years later everyone is convinced about the benefits of the service. India is a pioneer in exploring renewable energy sources like solar, wind energy etc. There are also other areas where India has proved its expertise. For instance, while countries of South Asia use bio-mass inefficiently, India is a leader in biomass energy resources. There are methods of guarantees which have been evolved in the working and maintenance of pipelines as in Europe. The IPI gas pipeline can also be evolved in a similar manner. What are the impediments in energy cooperation between India and Bangladesh? There are various models of energy pricing available in the world. In Nepal for instance, the state electricity corporation has started issuing shares to the general public for the construction of projects. The concept of peaking power makes hydropower a great proposition. However issues of political economy and rehabilitation make hydroelectric projects disadvantageous. The answer lies in creating an appropriate economic package for the losers.

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The SAARC Visa Exemption Scheme that was initiated in 1988 and became operational on 1 March 1992 was designed to facilitate closer interaction and cooperation among the peoples of the region. It is now increasingly felt that visa requirements must be waived for all SAARC citizens while traveling within the region and in case of security concerns, , people must at least be allowed to apply for visas at the point of entry. Another important step in this direction would be the setting up of the SAU. Once functional, it will be the most important center for learning on South Asian issues and will connect academics and researchers within the region. As South Asian economy grows and becomes one of the largest markets, there will be increasing. There is awareness that SAARChas not been able to make any significant headway, despite the tremendous potential for cooperation in the region. Three critical areas that can be addressed in this regard are: strategizing political cooperation, economic development, and social progress, where SAARC has lagged behind compared to most regional organizations like EU, ASEAN, and NAFTA. The 13th SAARC summit reflected this realization when China and Japan were accorded Observer Status ostensibly to reinvigorate the cooperation process by bringing actors from outside the region. South Asia is is composed of varied and interacting cultures, civilizations, and ideas, that can become the stepping stone towards a common South Asian identity. It is pertinent to reflect on SAARCs past successes and failures and also formulate a vision for the future. SAARC should be based on the four pillars of knowledge, technology, commerce, and culture. These should become instruments to bring people across the region into multiple partnerships and interactions. SAARC should follow a bottom- up rather than a top-down approach. On paper, politics has been kept away from SAARC deliberations, but politics has shaped the SAARC process from its inception. Unlike politics of opportunism however, SAARC must focus on the politics of opportunity, which can play a constructive role. The important question is what role cans the people in SAARC? SAARC is a peoples organization. SAARC can truly progress only with peoples initiative. For this, an exchange of information and ideas through people-to-people contact is crucial. The media also has a significant role to play but unfortunately, the South Asian Media has not played a very proactive role in this regard.
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On the question of SAU, is there any need to create new institutions or should already existing universities in SAARC countries be further developed? The role of the media is very important because it creates an impression on the minds of the people about their neighbors, whom they have never visited. The media thus has to be more responsible. South Asia is among the fastest growing regions of the world. Its countries broadly converge on areas of macro-economic policy. Regional arrangements like AFTA, MERCOSUR and NAFTA etc. have made substantial progress in their respective integration process. Despite being an ideal grouping for economic integration, South Asia remained untouched by the first wave of regionalism in the international arena which started in 1957. All major regional groupings came about from the late 1950s to the early 1970s in Asia, Europe, Latin America and Africa. The South Asian Region remained marred in mutual doubts and suspicions. It woke up to the next wave of regionalism which has come to be known as New Regionalism. It was against this backdrop that an Eminent Persons Group (EPG) was created and mandated to prepare a vision document for deeper regional integration. It suggested a preferential trade arrangement with the intention of bringing economies of the region closer, resulting in the creation of the South Asian Preferential Trade Arrangement (SAPTA) But SAPTA has failed in facilitating the process of actual and deeper integration due to the following four fundamental flaws in the agreement: The target setting of 0 to 5% tariff reduction has come too late (2012-2013). There is every possibility that by this time tariff rates might automatically come down to this level without any special effort within the SAPTA framework. Main obstacles have been non-tariff and not so much tariff barriers. There is no framework, or commitment in place and no deadline towards doing away with non-tariff barriers. It does not take care of the Least Developed Countries (LDCs). It has not taken into account the EPGs recommendations. The first wave of regionalism failed because of ignoring the requirements and demands of LDCs. Regional groupings are not just for preferential trade arrangements. It has to aim at the measures for deeper integration, which at present SAPTA lacks.

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Deeper integration can be pursued even without any special arrangements. One cannot move towards a customs or economic union without moving beyond preferential trade arrangements. What has happened to the EPGs recommendations? EPG came with a blue print. What has happened to the recommendations? The inaction in this regard has happened due to two broad reasons; Political Reasons and Opportunity Outside the experience in all regional groupings has been that the major country in the region plays a special role, and India must play its special role in South Asia by virtue of being the strongest economy. In Europe countries compete to grant transit permit there is no reason why it cannot happen in South Asia. There has to be a shift from the security of states to the security of the people. It this shift that will enable deeper engagement in the region. Retrieval of the state for alternate development strategies is the need of the hour. With the shift of economic power balance towards Asia, leading to a market driven integration. Indias economic engagement with ASEAN and China has been phenomenal. The prime ministers of India and China recently signed a statement agreeing in principle to work towards creating an Asian Economic Union. India is also trying to build a pan-Asian Economic Union. India's efforts are therefore clearly directed towards moving beyond SAARC and an attempt is being made to integrate the region through bilateral negotiations. Indias FTA with Singapore and Thailand are two such examples that have shown an inclination to deal individually with countries in the region. South Asia is going through a very difficult time. Fragile states with their weak political systems have added to the worries of the region. Ideally SAARC should be people-driven, but practically one sees scant engagement of the people in its processes. There are two important needs at this point of time for the SAARC countries; taking up asymmetric responsibility by states and an imperative need for a trusted change in attitude. SAARC 2015 The subject of current Asian Resurgence and its implications for developments in the Third Decade of the SAARC is of overriding significance both in the realm of current Policy Studies in South Asia and for the study of evolution of Pan Asian cooperation in coming years. The urgency to address these issues has increased because of the important decisions taken in 2006 to;
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draw a road-map for regional cooperation in South Asia for the next decade; admit Afghanistan as a new member of SAARC; and grant Observer status to China, Japan, Korea, the EU and the USA. Of late, both the Prime Ministers of India and of Pakistan have referred to the Asian resurgence and for the SAARC as a whole to be an integral part of it. For this there is a need for the countries of the subcontinent to reconnect and then establish connectivity with the larger Asian neighborhood. But the consciousness has yet to emerge in the psyche of the SAARC about the advantage it can take from tremendous synergies by the two processes of internal and external regional cooperations moving on parallel tracks and in a mutually reinforcing manner. Asian Resurgence Asias strength lies in its size and diversity. Its distinct sub-regions East Asia, Central Asia, South Asia and West Asia are promising, vibrant, and robust. They are critical to the world economy both because of their strategic locations and also the huge commands they have on vital natural resources. The four sub-regions are not uniform in terms of the levels of their development. Each region therefore faces diverse challenges. Asia accounts for: economy, more than 60 per cent of the worlds population, one-third of the world

over a quarter of international exports, and

largest amount of global foreign direct

investment. The Continent has become the engine for the revival of the global economy with its large reservoir of entrepreneurial, technical and technological skills and abundant natural resources including oil and gas. Asia is the largest market in the world with an increasing portion of the global workforce and a growing middle class. The rise of China and India has made a profound impact globally and particularly in the rest of Asia. China is spearheading changes at a fast pace in East Asia. India is impacting on rest of the SAARC, the Gulf region and to some extent on Central Asia apart from its growing ties with East Asia. Other major Background Paper countries like Russia, Japan, South Korea, Pakistan, Saudi Arabia and regional groupings such as the ASEAN and GCC are also progressing fast. Japans growth is reviving. South Asian reforms and liberalization are transforming the lives of more than a billion people. The Central Asian states are now emerging economies, as they are keen to leverage their natural wealth. The West Asian countries with their oil wealth are generating capital surpluses and transforming themselves into affluent societies. This region is imperceptibly and cautiously moving forward both economically and politically.
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Globalization and Rise of Asia Indian Prime Minister, Dr. Manmohan Singh, has observed that a dynamic Asia could well power global growth and provide new opportunities for growth for EU as well as North America. He has pointed out that with China trebling its share of the world GDP and India doubling it over the past decades, the international community needs global institutions and new global rules of the game that can facilitate the peaceful rise of new nations in Asia. At the same time globalization is a reality and Asian nations have to contend with its attendant opportunities and challenges. With increasing globalization, either Asian country has to go out and play the game or have the game brought to them. The more cooperation there is among them, the more they will be able to follow the former path. We are now witnessing the phenomenon of free movement of people and the global hunt for talent with its impact on the world economy and both its undocumented benefits and harm. Though the literature and policy on the free movement of people remains scanty and patchy, there is the recognition in academic circles that the economic interaction of major Asian powers, namely China and India is being driven by Asian Diaspora in the USA and Canada. SAARC: Slow Progress and Uncertain Prospects : The SAARC has been bogged by political problems and disputes among its member countries. It has not achieved satisfactory results within its present parameters of regional cooperation. It has also not succeeded in establishing meaningful cooperation with other regional groupings in South East and Central Asia and around the Gulf. Neither has the SAARC been able to take advantage of synergies that can be harnessed by internal and external regional cooperations. As a result, the SAARC remains marginalized at the periphery of the emerging Asian resurgence. Contrastingly, the ASEANs pace of progress and its record of meaningful cooperation with other regional and international organizations are well known. It has emerged as a driving force for Asian resurgence as became evident at the ASEAN plus Three Summit and the two East Asia Summits held in Kuala Lumpur in December 2005 and in Cebu, Philippines in January 2007. There are interesting debates within South Asia about improving competitiveness, making SAFTA much wider in its geographical reach, evolving consensus on linking the SAARC to other regional organizations and deciding on IndiaChina Free Trade Agreement to attract other countries of Asia to this process of collective Asian thinking and actions. The approach discussed and advocated by several prominent academics is a comprehensive approach of economic partnerships.
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Growing Interdependence
Interdependence of Asian countries is growing very quickly in economic, financial, environmental and social areas such as health, education and social development. This has now even expanded to politico-strategic fields including counter-terrorism and maritime security. Regional institutions like the ASEAN and the SAARC are now working on arriving at some concrete actions on trade, investment and finance. The Economic and Social Commission for Asia and the Pacific (ESCAP) is engaged in the Asian Highway Project. The private sector is interacting in a much more integrated manner.

Expanding Horizons Unlike the traditional emphasis on manufacturing sector, these

economies are leveraging technological innovations and trying to move up the value chain. Innovation in products and processes on a global scale are likely to be the next wave. Experts reckon that India is likely to emerge as a hub for innovation on a global scale. Also, there is a possibility of synergy in the near future as a result of Chinese strength in hardware combining with Indian strength in software. Active Role of Non-State Actors The civil societies have not only widened and deepened their interactions on regional issues (like common vulnerability to the scourge of terrorism, HIV/AIDS, Pandemic Avian Flu, and natural disasters like Tsunami) but also started networking and sharing experiences and best practices among them. This has a binding impact on the consciousness of Asians. Besides the discussion on issues of democracy, there are inter-cultural dialogues that bind the diverse cultures of the region. The emerging framework is that of cooperation and inclusiveness leading to interregional regime-building. As the relationship between national cohesion, regional integration processes in Asia and the globalization process unfolds itself, the rationale for Asian Economic Cooperation through building blocks of cooperation becomes clearer. The interest of the international community in the SAARC per se is evident as now the EU, the USA, Japan, China and South Korea have observer status in the SAARC. Realism in a transforming Asia is paving way to pragmatic approaches to cooperation and integration. For instance, at the Dhaka Summit held last November, the Islamic Republic of Afghanistan was invited to join the SAARC as a member. As a sequel to the decisions taken in the Summit and in the Council of Ministers, China, Japan, Korea, the US and the EU will be henceforth invited to the SAARC forum as observers. They will be attending the SAARC Summit in April 2007 in New Delhi as observers. The East Asia Summit held last December decided to form the East.
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Today, cooperation between the SAARC and its neighboring countries/regions is both essential and inevitable. This would firm up connectivity and enable its member countries to leverage the opportunities provided by the current Asian dynamism. This expanding horizon could bring about unprecedented benefits to the South Asia region in areas like economic integration, social dynamism, politico strategic clouts and people-to-people contacts. This is likely to trigger a range of 10 SAARC 2015: Expanding Horizons cross-border infrastructural projects including highways, gas pipelines, electricity grid, inter-port linkages, etc. This inter-regional connectivity could mainstream-ise the South Asia region in the current Asian dynamism. For this the SAARC needs to strategies and concretize actions. The SAARC has the both the potential and the wherewithal to become a driving force for promoting wider Asian cooperation incorporating all the four sub-regions of Asia. The time is ripe for the SAARC politicians, businesses, policy-makers and civil society actors to seriously deliberate on these issues and steadily engage in policy dialogues with their counterparts in the neighbouring regions. This strand of thinking is already reflected in the decisions at the Dhaka SAARC Summit and the two East Asia Summits. Forging Cooperation There are several questions that can give us some definite direction to South Asias engagement with other countries/regions in Asia in the process of promoting the emerging Asia wide cooperation. How can the SAARC forge cooperation with Asian countries such as China and Japan and with other regional groupings in Asia such as the ASEAN, ECO, and the GCC on a mutually beneficial basis? What are the prospects, challenges and modalities of cooperation between the SAARC and these entities? With Afghanistan becoming a member of the SAARC what possibilities may emerge in regard to cooperation between South Asia and Central Asia? With China, Korea and Japan as observers in the SAARC and India as a participant in East Asia Summit meetings how can cooperation and integration between South Asian and East Asia economies are facilitated?

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Secretariats of the SAARC and the ASEAN have regular contacts. The Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMST-EC) could in fact act as a bridge between the SAARC and the ASEAN. Countries of South Asia and those belonging to the Gulf region have enjoyed close relationship for centuries. This is further strengthened by the presence of large number of South Asian expatriates in the GCC member countries and also the steadily increasing economic interactions with these countries. Gulf countries are looking for investment possibilities in South Asia and for cooperation in industry, education, and S & T. Pakistan and Afghanistan also enjoy pivotal positions at the crossroads of these vital regions of the world South Asia, Central Asia and onwards to Russia and Europe. They are therefore, uniquely positioned to leverage this location as a bridgehead for multi-sectoral cooperation between these regions. This includes gas pipelines, transportation, trade and tourism. They can also play an instrumental role in developing linkages between the SAARC and the ECO. The bourgeoning economic relations between India and China, Indias Look East Policy, possible reopening of various land trade routes to China, the Chinese participation in the Gwadar port construction in Pakistan and construction of road links between Afghanistan and Iran are all transforming the nature of cooperation and integration among the Asian countries. Challenges for SAARC 2015: Internal and External Regional Cooperation So far, the programmers of the SAARC have focused on internal regional cooperation designed to face important challenges such as: i) Building on Progress of SAFTA; ii) Poverty Reduction; iii) Improving Intra-regional and Inter-regional Connectivity; iv) Securing Energy Security; v) Management of Natural Disasters; vi) Protection and Preservation of Environment; vii) Fighting Terrorism and Extremism. External regional cooperationeven of the kind that would assist in meeting aforesaid challengeshas not received commensurate attention. Expanding Horizons the SAARC is conspicuously missing. What is more, the SAARC has so far worked in an episodic and not systematic fashion. It also faces resource constraints. All these have made the SAARC process slow, uncompetitive and inward looking.

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What needs to be done to create conditions under which internal and external regional cooperation may be able to reinforce one another? Can India and Pakistan take along the other least developed countries of South Asia in their integration effort with rest of the Asian economies? For meeting the above challenges, it is important that political leaders of the SAARC countries embrace both a vision and a strategy for change in political atmosphere and economic setting. Strategic decision-making is required rather than short-term partisan tactics. In its third decade, governments, businesses, donors and civil society in South Asia need to forge new partnerships between them and their counterparts in neighboring regions. A new model of cooperation is required, based on mutual interests, trust and accountability, which goes beyond the conventional kind of regional cooperation. The idea should be to evolve and promote people centric cooperation.

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SAARC Vision and Strategies for External Regional Cooperation; From all accounts, it appears that the questions relating to external regional cooperation of the SAARC and those pertaining to its link with the eventual Pan Asian Regional Cooperation are important and serious enough for politicians and business leaders to address now in all earnestness. For this purpose, both the intellectual energy as well as the strategic grip on issues is required. Through wisdom and foresight, the SAARC leaders can work with their counterparts from neighboring regions for establishing inter-regional connectivity, building a peaceful, increasingly cooperating and prosperous Asia where each country and region has its fair part a real and achievable goal. A building block approach of regional cooperation will result progressively in Asian integration that is based on a solid foundation. Is this not the opportune time for the SAARC Leaders to consider setting up a South Asia Vision and Strategy Group to undertake a Study on Issues and Modalities of External Cooperation of the SAARC vis-a-vis its neighboring countries and regional groupings? Side by side: (a) academics should evolve gateway strategies for South Asia in respect to its neighbors, (b) governments should build communication bridges through specific projects such as the SAARC car rallies, South Asian University, and (c) sustained efforts need to be made to raise public consciousness on these issues. Consensus-building There is a need to institute an independent and inclusive consensus-building process in the SAARC region to look beyond the horizons of the SAARC in a resurgent Asia. This should be in tandem with government initiatives. By a change in its outlook, South Asia will gain its true strength, its relevance, its idealism and therefore its support among the people. What the SAARC needs to do in its third decade is to actualize a vision of integration that expands security, economic opportunity and political freedom throughout South Asia and in its neighborhood. This will imply willingness on the part of member states to have a little less sovereignty, more engaged regional diplomacy, more consistent support to South Asian Economic Community, and a well-structured security dialogue and a concrete plan of action for all this. This will enable member countries of the SAARC to optimize prospects of growth and

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prosperity by fostering such cooperation within the SAARC framework that will also simultaneously facilitate progressive integration of South Asian economies within the larger framework of Asian Economic Cooperation Synergizing Internal and External Cooperation The 13th SAARC Summit held in Dhaka in December 2005 took some important decisions (Annex I) on a) External Profile and Linkages of the SAARC, 14 SAARC 2015: Expanding Horizons b) Strengthening Institutional Mechanisms of the SAARC, and c) the SAARC Vision: An Agenda for Third Decade of SAARC. Pragmatism indicates that all these decisions need to be understood and implemented in the context of both internal and external regional cooperation of the SAARC. 50. The Heads of State or Government agreed that with the incremental broadening of the SAARC agenda and increased emphasis being placed on implementation of plans and programmers, there was a need for a commensurate strengthening of institutional capabilities of the SAARC. Recognizing the importance of thematic Ministerial meetings, they emphasized that these meetings should focus on regional challenges and priorities and contribute to the realization of the objectives of the SAARC. They agreed that on completion of twenty years of the SAARCs existence, it was essential that a comprehensive review and reform of all the SAARC institutions and mechanisms, including the Secretariat and the regional Centers should be undertaken. In this context, they called on 16 SAARC 2015: Expanding Horizons the Council of Ministers to convene a Meeting of Experts, to be nominated by each Member State, to undertake a detailed Study and present a report to the next Council of Ministers. They empowered the current Chairman of the Council of Ministers to prepare within the next fifteen days a draft Terms of Reference for the Study to be approved, if necessary, by tele-conferencing of all the SAARC Foreign Ministers.

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China as Observer in SAARC China was committed to integrate into the regional development of SAARC an Observer. While there were some unresolved issues, these should not be obstacles in the way of strengthening cooperation of the region with China to create a win win situation for both sides. China looked at the observer status in the SAARC as an opportunity for market and investment. Chinas priorities were trade, cooperation in energy and natural resources, infrastructure and communication and people-to-people relations. The economic relations between China and South Asian countries had mounted rapidly and Chinas trade with them in 2006 amounted to about US$ 26 billion. Terrorism The South Asian region has been harshly hit by terrorist activities. It was recommended that the region should consider the possibility of establishing a multilateral mechanism to effectively combat terrorism. Water Resources As an upper stream country, China might undertake common research on various issues of the usage with down stream countries. Free-Trade Operationalisation of the SAFTA in 2006 was an important step in regional cooperation. China has already signed FTA with Pakistan. The Joint Study Group set up by China and India had concluded its work on the feasibility of FTA and a Comprehensive Economic Cooperation Agreement between them. India has a predominant role in intra-SAARC trade and China is sensitive to Indias susceptibilities. Cross-border Linkages India and China did not think that the boundary issue should be an obstacle in the improvement of their relations and promotion of trade in the border areas. The 28 SAARC 2015: Expanding Horizons concept of the border trade should be widened to the larger concept of trade at the border. Both countries need to enter into an agreement on cross-border movement, broadening the trade basket, improving the infrastructure and strengthening mutual trust.

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Pan-Asian Cooperation Time has now come for the SAARC to explore the development of closer relations with other regional entities and neighboring countries. Positive developments in China-India relations, as is evident from the raising of the level of relations between the two countries from constructive cooperation to strategic cooperation, augured well for the future of South Asia. Indias presence now in the East Asia Summit and in the Shanghai Cooperation Organization (SCO) where China and India interacted with each other might facilitate Pan Asian Cooperation. Reference was made to the first Asian Relations conference held several decades ago in which the then Prime Minister Jawaharlal Nehru had spelt out ideas relating to Asian unity. Recommendations 1. The South Asian region should think big. Since the South Asian growth was driven by India, the latter would therefore stand to benefit if SAARC were to establish synergies with other regional bodies and important neighboring countries. In this context, it was suggested that the SAARC should define what would be the role of Observer countries from Asia. The parameters of their role should be defined with clear objectives in mind. Possibility may be explored of according them the status of Dialogue Partners. 2. The SAARC needs to address the critical question of repositioning itself as a community in the changing Asian and global context. In due course, the SAARC needs to explore the possibility of becoming an essential link in the new Asianism. 3. Work for the establishment of a South Asian University may be undertaken on a priority basis. 4. SAARC should organize more trade exhibitions in East Asia. 5. Skilled manpower from South Asia would be welcome in countries like Korea and Japan in the coming years due to emerging shortages of professionals there. 6. Beyond trade and investment, there were other opportunities available now to the SAARC for cooperation with Asian countries outside the region in areas such as terrorism, drug smuggling, environment, rural development and poverty reduction. The SAARC countries could also develop with neighboring countries sister city relationships and sister province relationships.

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1) 2) 3) 4) 5) SAARC: Organizational Setup and Economic Aspects by D. K. Sharma 6) Food for Thought: The Experience of SAARC Region by Sanjeev Chopra

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