SAARC Secretariat

18th SAARC Summit

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South Asian Regional Cooperation (SAARC) seems to have reached its nadir. With Brexit
having shaken up the European Union in June 2016, it is not surprising that the least
economically integrated region of the world is breaking apart. In general, the rise of
nationalism the world over seems to have relegated regional cooperation to a lower rank
in the list of a country’s priorities.

The SAARC meeting which was supposed to be held in Islamabad on November 15 to

16 th 2016 has been postponed indefinitely because India withdrew from it, protesting
against Pakistan’s hand in the Uri terrorist attack. All others except Nepal, the current
head of SAARC withdrew. The chances are that the 19 th SAARC meeting may not take
place in 2017 in case all members are not present. This is a very disturbing development
that would hinder the progress of regional cooperation in South Asia. But it signifies that
regional cooperation in the midst of two acrimonious neighbours cannot flourish
anymore. Only if there is sub-regional cooperation among countries of the region can
there be some success in achieving the goals of development and poverty reduction.

Read | SAARC without Pakistan: Not now, not ever

Begun in 1987, SAARC is only 30 years old. Today it comprises of eight members—
Afghanistan, Pakistan, India, Nepal, Bangladesh, Maldives, Bhutan and Sri Lanka. It is a
shame that whatever progress has been achieved so far will be wiped out by the recent
and indefinite postponement of the 19 th Summit.

Regional cooperation is important for reducing inequality among member countries and
promoting people to people contact that can increase tourism and enhance cultural ties.
South Asia happens to be the one of the most backward regions of the world containing
23.4 per cent of the world’s population but accounting only for 6.6 percent of the world’s
GDP (in terms of Purchasing Power Parity). It contains 40 per cent of the world’s poor
surviving on less than $1.25 a day.

The achievements of SAARC have not been spectacular though India has reduced custom
duties on most product imports from the region. India has been especially generous to
Bangladesh and Nepal with whom it has an open border. There have been cooperation
deals signed in the fields of agriculture, energy, SMEs, investment, services and human
development at the 18 th SAARC meeting in Kathmandu. Compared to the monumental
problems all the countries face in the region towards eradicating poverty the
achievements have been rather meagre. There are still a lot of barriers to travelling freely
between the countries of the region due to lack of connectivity and transportation.
Geopolitics has taken over geo-economics in most cases and even when the countries
concerned know the clear economic gains, they are reluctant to let down barriers to trade
and investment for geopolitical reasons. Pakistan blocked three connectivity agreements
proposed in the Kathmandu summit because Pakistan had not completed its “internal
process” to endorse them.

Even though there is widespread smuggling going on between Pakistan and India the total
quantum of trade between the two countries at $2.6 billion which is meagre as a
proportion of India’s total trade with the world. Pakistan has a huge trade deficit with
India. Even so more trade and investment could have eased the political impasse as it
would have increased the incomes and living standards of people in both countries. Yet
there is a tremendous amount of mistrust between the two governments on economic
issues. Pakistan is afraid of being swamped by Indian goods, if it allows freer access to
Indian goods.

Read | BIMSTEC and India’s shifting diplomatic calculus

Even though India granted the MFN status in 1995, Pakistan has been reluctant to
reciprocate. Though the Pakistan Cabinet approved of it in November 2011, it has
continued to delay . Now it has come up with another type of trade facilitation—Non
Discriminatory Market Access Agreement which is not the same as MFN which means
that Pakistan’s tariffs will continue to be charged at differential rates for Indian products
as compared to Pakistan’s other trade partners.

Political problems have stood in the way of cordial economic relations between the two
countries. Pakistan however has good relations with Sri Lanka and has a Free Trade
Agreement since 2006. China’s role is very important in the region. Out of the two huge
countries dominating the region—China and India, China is gaining ground in terms of
increasing trade and doling out monetary help for infrastructure building under its One
Belt One Road Project. All the SAARC members have forged closer trade ties with
China.

Nepal is specially becoming closer and China is investing large amount in it. In March
2016, former Prime Minister of Nepal K.P. Oli, paid a visit to China and signed 10 MOUs
to boost economic cooperation that include an agreement to facilitate trade and transit
between the two neighbours, concessional loan for constructing Pokhara Regional Airport
and an economic and technical cooperation agreement. With India, in 2016 two MOUs
were signed worth $2 billion. The first was $1 bn line of credit and second was $1 bn
assistance for rebuilding after the earthquake.

Read | Urgent need for new architecture for India’s neighbourhood policy

Bangladesh is also receiving a huge loan of $21 billion from China making India’s loan
of $2 billion look puny. There are 27 agreements and MOUs including 12 loan and
mutual agreements in building roads, bridges, capacity building and skill development,
BCIM-EC initiative and industrial production. China is number one trade partner of
Bangladesh and it imported $9.8 billion worth of goods in 2015-16.

In Pakistan, China is spending $46 billion in infrastructure that includes the building of
economic corridor between Kashgar, Xinjiang province of China and Gwadar, a Pakistani
port on the Arabian sea. Prime Minister Nawaz Sharif recently inaugurated a 340 MW
power plant built with Chinese aid and pledged that the menace of blackouts will last
only till 2018. It is also giving soft loans of $1 billion for three road projects in the
China- Pakistan Economic Corridor.

Chinese President Xi Jinping toured South Asia promoting the Silk Road initiative and
became the first Chinese Head of State to visit Maldives where China is upgrading
Maldives’ international airport after the cancellation of a deal with an Indian firm in
2012.

In Sri Lanka, China was financing s $1.4 billion “Colombo Port City” project but due to
some controversy, President Maithripala Sirisena cancelled it in 2015. But overall since
2005, China has funded or constructed 70 per cent of new infrastructure projects.

Thus SAARC clearly needs to be reorganized because in its current form it is unlikely to
work with the souring of relations between Pakistan and India after the Uri attack and
Pakistan’s cosying up to China in building its infrastructure, some of it through POK.
China is taking a more active role in all the member SAARC countries and they seem to
be having strong bilateral relations with China and not with India, the biggest country in
the region.

Read | Inducting BIMSTEC into BRICS talks was a good idea

Admitting China in SAARC as a full member instead of being one of the Observers along
with Australia, Iran, Republic of Korea, Mauritius, Myanmar EU, US and Japan, was
discussed at the Kathmandu summit but it was not supported by India. India’s role will
remain important in SAARC in terms of geography and population (occupying 70 per
cent of the area and population) and GDP. Since SAARC has faced many hitches in the
past, several sub regional initiatives have turned out to be successful like the SASEC
(South Asian Sub Regional Economic cooperation comprising of Bangladesh, Bhutan,
India, Maldives, Nepal and Sri Lanka and BBIN (involving Bangladesh, Bhutan, India
and Nepal). BBIN sub region signed a Motor Vehicles agreement to ensure free and
unfettered movement of passenger, personal and cargo vehicles. Around $30 billion
regional projects have been started under SASEC in areas of transport, energy, trade
facilitation, and information, communication technology. Much will depend on how
deeply interested Prime Minister Modi is in promoting regional cooperation and what
relations India has with its neighbours in 2017. Pakistan’s cooperation is also vital for
SAARC to succeed and revived.

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The views expressed above belong to the author(s).