INTRODUCTION

The South Asian Association for Regional Cooperation (SAARC) is an organisation of South Asian nations, founded in December 1985 by ZiaurRahman and dedicated to economic, technological, social, and cultural development emphasising collective self-reliance. Its seven founding members areBangladesh, Bhutan, India, the Maldives, Nepal,Pakistan, and Sri Lanka. Afghanistan joined the organization in 2005. Meetings of heads of state are usually scheduled annually; meetings of foreign secretaries, twice annually. It is headquartered in Kathmandu, Nepal. The 16 stated areas of cooperation are agriculture and rural, biotechnology, culture, energy, environment, economy and trade, finance, funding mechanism, human resource development, poverty alleviation, people to people contact, security aspects, social development, science and technology; communications, tourism . The concept of SAARC was first adopted by Bangladesh during 1977, under the administration Of President Ziaur Rahman . In the late 1970s, SAARC nations agreed upon the creation of a trade bloc consisting of South Asian countries. The idea of regional cooperation in South Asia was again mooted in May 1980. The foreign secretaries of the seven countries met for the first time in Colombo in April 1981. The Committee of the Whole, which met in Colombo in August 1985, identified five broad areas for regional cooperation. New areas of cooperation were added in the following years.(1) SAARC BODIES.

Council of Ministers. Council of Minsiters comprises of the Ministers of Foreign /External Affairs of the Member States. As provided in Article V of the Charter, The Council is mandated to meet twice a year as also to hold its extra-ordinary session (by agreement of among the Member States). The next (thirty-second) session of the Council will be convened at Thimphu on 27 April 2010, preceding the Sixteenth Summit.

Standing Committee.
The Standing Committee comprises of the Foreign Secretaries of the SAARC Member States. As provided in Article V of the SAARC Charter, they take measures /decisions relating to: overall monitoring and coordination of programme of cooepration under different areas. Standing Committee is mandated to meet as often as necessary. Generally, they have met preceding the sessions of the Council of Ministers. The Committee reports to the Council of Ministers, on regular matters; and, as needed, asks for specific decision on policy matters from the Council.

Technical Committees.
Technical Committees comprising representatives of Member States are responsible for the implementation,

coordination and monitoring of the programmes in their respective areas of cooperation.

In addition to determining the pontential and the scope of regional cooperation in agreed areas, Technical Committees are involved in formulation of programmes and preparation of projects. They also coordinate the implementaion of sectoral programmes and assess the implementation regularly. The following Technical Committees work on their respective areas to provide support to SAARC activities. Technical Committee on Agriculture and Rural Development. Technical Committee on Health and Population Activities. Technical Committee on Women, Youth and Children. Technical Committee on Science and Technology. Technical Committee on Transport. Technical Committee on Environment.(2)

CAUSES OF FORMATION OF SAARC.

Over the years countries through the world have formed many regional trading blocks, and it is also proved by the experience of successful regional groupings like the European Union that they play an important role in the world economy and trade. Looking through the world since 1960's we can see that an important motivation of the formation and development of regional trading blocks is to compete with the growing world outside. One of the purposes of the establishment of trading blocks is to arrange easier trade within the region and to increase efficiency, growth and competitiveness. In the recent years interest in economic analysis of preferential trade liberalization has increased with the rise of regionalism. It is argued that trade liberalization and regional economic integration can help a region to increase its intra-regional trade by exploring the size of the market. This may in turn yield efficiency and bring benefits not only by exploration of economies of scale but also by dynamic and upward shifts in production function (1). Driven towards integration by the pressure of economic interest of the region, seven of the South Asian countriesBangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Srilanka formed the South Asian Association for Regional Cooperation (SAARC) in 1985. One the major objective of the formation of SAARC forum was to accelerate the process of economic and social development in member States. Subsequently, trade promotion was also actively pursued as an area of economic cooperation. They formed the SAARC Preferential Trading Agreement (SAPTA) in 1993 and transformed it into South Asian Free Trade Area (SAFTA) For a number of South Asian nations, the 1990s marked the liberalization of their domestic trade and investment regimes to intensify their integration with the world economy, by launching of the regional cooperation body SAARC in 1985(3). However, since the inception of SAARC, the achievement has been considered very insignificant and the level of intra-regional trade among the SAARC countries is still very low. With a total population which accounts for one-fifths of the world population and a combined gross national income of $ 3 trillion, SAARC only provides about one per cent of world production . With the present

low level of intra-regional trade and the perceived competitiveness among the SAARC countries question rises on the potential gains of regionalism which has not yeilded much in the case of SAARC since its initiation primarily due to the tenuous political relations between India and Pakistan and a general environment of mistrust "among its members. Compared to other regional blocs, the performance of the SAARC is dismal. In this background the paper attempts to analyze the performance of SAARC as a regional block, the trend in the intra-SAARC trade, intensity of India's trade with the other members of the SAARC and a brief analysis of the trade basket of the four potential members of the SAARC.in 2004 with a view to enhance their productive capacity and the region's trading interests(4).

PRESENT OBJECTIVES OF SSARC.

1. To present an overview of the basic indicators of the SAARC nations. 2. To assess the trends in the intra-SAARC trade. 3. To estimate the intensity of trade relations between India and the other SAARC members. 4. To identify the potential commodity groups possessing trade potential between these nations. 5. To assess the future potentiality of the intra-regional trade of this regional grouping.(5)

PRESENT SITUATION OF SAARC REGION.

The South Asian region is extraordinarily diverse in terms of country size, economic and social development, geography, political systems languages and also cultures. Three of the eight countries under South Asian region, viz., Afghanistan, Nepal, and Bhutan are landlocked and mountainous: while Srilanka is an island and the Maldives is an archipelago of low-lying coral islands in the central Indian Ocean. India is the only SAARC country that shares a land border with four members and sea border with two, no other SAARC country shares common border with each other.(6) Compared with the rest of the world, this region--The SAARC is not open enough in terms of international trade, rather is very much inwards oriented. Intra regional trade flow in this region is also very much insignificant when compared with other regional blocks. This is partly because the major economies such as India, Pakistan, Bangladesh are not outward oriented but the region translated itself from a position of slowest growing region during the 1960s and the 1970s to one of the fastest growing regions in the world since the 1980s. In terms of GDP growth, the South Asia has performed robust growth over the years among the low income countries (7). As per the World Bank database, during the 1960's, GDP growth in the region was placed at 4.2 per cent as compared to 5.4 per cent at the global level. Except during the 1960s and 1970s, the GDP growth in South Asia was higher than those of the

world output growth till 2008 . The growth in South Asia had been sustained at an average of 5.4 per cent during 1980-1999 followed by higher average growth of 6.8 per cent during 2000-08. Reflecting growing savings, the gross capital formation of South Asian economies almost doubled from 15.1 per cent during the 1960's to 29.1 per cent during 2008 as against a decline from 23.1 per cent to 21.5 per cent during the same period at the world level. However some economies of the region Viz., Afghanistan, Nepal, Bhutan and Bangladesh still depend on foreign savings/aid for financing their resource gaps in their respective economies. The annual average growth of the GDP percapita along with the classification of four sectors Agriculture, Industry, Manufacturing and services sector for two sub periods 1988-98, 1998-08 presents that the growth of the industrial sector along with the manufacturing sector and the service sector is gradually on rise over the past two decades except in the case of Maldives and Nepal and the growth of GDP percapita is low in Pakistan (1.7%, 2.6% respectively), followed by Nepal (2.4%, 1.5% respectively) for the two sub periods under study. The number of people living below the poverty line is high in these economies, In the case of literacy Maldives ranks high and with reference to population India ranks first. Under the World Bank designated category, amongst the seven countries, four economies namely Bangladesh, Bhutan, Maldives and Nepal are least developed countries (LDC's); and India, Pakistan, Sri Lanka are considered as developing countries. On the basis of income Bhutan, Maldives and Srilanka are lower-middle-income countries and Bangladesh, India, Nepal and Pakistan are low income countries.

CURRENT ISSUES AND HURDELES IN SUCCESS OF SAARC.

Historically, South Asia was one political entity with many decentralized structures. Each sub-region had its own shade of culture. This unity in diversity continued even after colonization by Britain. However, some kind of standardization, particularly in legal and administrative frameworks, tied together the diverse units during the British era. When colonial rule ended, those diverse units got truncated, leaving behind not only unprecedented ethnic flows of population across the borders but also a permanent source of ethno-religious discord.(8) Colonial rulers had largely created the South Asian states by executive orders. The burden of resolving the unresolved and bitter territorial or border

disputes fell on subsequent national elites. The concept of nationhood was often negotiated by colonial powers and materialized in truncated forms. In many cases the creation of a state went against territorial, ethnic, religious or cultural traditions. Very often, national governments were imposed on a society, which was itself divided by the gap between traditional beliefs and modern attitudes, and by sectoral differences, religious beliefs or differential access to power. The state, in order to assert its domination, most often became bureaucratic and coercive and became entrenched well before a coherent idea of nationhood could develop. There are also at least two nations (Pakistan and Bangladesh) in the region that experienced neocolonialism and internal colonialism and therefore have a bitter past. The internal difficulties faced by most South Asian governments have contributed to a deterioration in law and order, increasing ethnic and sectarian conflict, the theocratization of societies, degradation of the environment, rampant corruption, massive violation of human rights and the marginalization of the poor and the weak. Given the regional politico-economic divide, substantial cooperation in the region cannot be achieved overnight. Notwithstanding this difficulty, SAARC has developed itself into a fairly elaborate institutional infrastructure. Some core areas of economic cooperation such as poverty alleviation and intra-regional trade in the form of the South Asian Free Trade Area (SAFTA) have been gradually included in the agenda. Though differentiated in pace and content, all the South Asian countries have embraced economic liberalization. On the more optimistic side, SAARC has also shown potential for emerging as a forum for dialogue, negotiations, preventive diplomacy, and confidence and peace building. This potential is,

however, clearly far from been effectively tapped, perhaps due to institutional bottlenecks and lack of strong political will among ruling elites. The South Asian community personality broadly depends on three interlinked economic and political factors: First, the character of economic transactions such as formal and informal trade relationships and whether there has been an honest attempt at reducing trade imbalances; second, how leaders feel about the outstanding regional problems, especially bilateral ones, such as the Indo-Pakistan conflict, India-Bangladesh border disputes, and those leaders efforts to minimize these tensions; and third, the level of consciousness among citizens of the region toward the status of human rights in the region, and specifically, how they feel about states which at times, instead of promoting freedoms, curb them The South Asia, a home to one fifth population of the globe, most of them living on abject poverty, has been unable to achieve goals as enshrined in the SAARC Charter and its various declarations largely due to the chronic tension, intra-regional conflict and absence of trust between India and Pakistan, occasional hiccups in relations between India and her neighbors.(9) In the light of its poor performances, the voice is getting louder, specially from the civil society, that the member states requires a new perspective to give impetus to its functioning that is often at slow pace. Against this backdrop, the IFA and FES recently brought veteran diplomats, politicians, experts and senior army officers around the region at a seminar to put forth their views on how to injecting a new life into the SARRC. The collection of their thought-provoking papers resulted in 'New Life within SAARC' that contains 17 write-ups, which deal with diverse areas of mutual interests and cooperation from different angles. The authors talk about various challenges facing the region and offer recommendations to inject a new life in it. Majority of them calls for changing mindset if the region is to better tackle the problems of 21st century. Developing the region into a free trade area, harnessing its vast natural and water

resources to meet ever-growing demand of energy consummation and fighting the menace of terrorism are some major issues discussed in the collection. Former foreign minister Dr. Prakash Chandar Lohani, in his article entitled 'What Vision for South Asian Regional Cooperation?' tries to pinpoint the factors behind the slow pace of the regional body. He writes: "The fact remains that the SAARC is not in the priority agenda of the most nations. The state apparatus in all the countries spring into action normally during the period of summits and then revert back to its attitude of benign neglect." Dr. Lohani argues that the regional grouping must be a force to improve the lives of its denizens if it has to move ahead forcefully. Veteran Indian diplomat K. V. Rajan has candidly put forth deep-seated perception among a section of Indian politicians and bureaucrats: "There has been an underlying conviction within a substantial section of New Delhi's political and bureaucratic elites that SAARC bestows an undeserved sense of equality to its smaller neighbours, an opportunity for ganging up to the detriment of India's interests, that India can prosper more easily if it is not shackled to its immediate neighborhood." However, at the end of the day of summit, it is India that demonstrates self-confidence and commitment to the long-term goal of SAARC, says Rajan. He is for an empowered and alert civil society to do away with the bilateral irritants that often hinder the smooth functioning of the SAARC. To deal with terrorism that has plagued almost all countries of the region, the authors of the book calls for adopting integrated approach since military solution alone is not sufficient. In this regards, Indian retired brigadier general Arun Sahagal offers prudent ideas. "While military force is essential component to contain terrorism, it is equally important that space so created is exploited politically in terms of addressing public grievances and underlying causes." Mr. Sahagal writes. "To boost SAFTA," Dr. Posh Raj Pandey argues, "the member states must dismantle protectionist barriers to trade and accelerate exports between them." Nishchal N. Pandey talks about the concept of common currency, South Asian parliament and

developing SAFTA into economic union in the model of European Union. Although they sound ideal, they are not entirely impossible if the leaders move ahead with a clear vision, open mindset and highlevel commitment. Likewise, industrialist Rajendra Khetan suggests for setting up an apex regional trade agency and South Asian Multination to integrate it with global economy. The tune of optimism runs high in the book, which is useful for any reader interested to know about SAARC as it has critically and objectively analysed core issues and challenges of region. It is more useful for the politicians and bureaucrats to see the SAARC from fresh perspective.

FUTURE POSSIABILITIES OF SAARC.

The challenge before the political leadership of the various Saarc countries is to actualise this great potential for transforming the material conditions of their people and performing a leadership role in building a better world. It is in this context that the 17th SAARC summit in Addu (Maldives) on the theme of Building Bridges, gains significance. Five interrelated policy challenges need to be addressed at the individual country level on the basis of regional cooperation within the SAARC framework: (i) Rapid implementation of free trade and investment envisaged in the South Asian Free Trade Agreement needs to be undertaken. Inspite of commendable recent progress,. (10) South Asia remains the least integrated region in the world. Intra-regional trade as a share of total trade in South Asia remains at about five per cent, which is the lowest for any region in the world. Other measures of integration such as cross-border investment; cross-border movement of people; sharing of ideas; communication as measured by telephone calls (only seven per cent of international telephone calls are regional, compared to 71 per cent in East Asia); and transfer of technology and royalty payments are all extremely low. Achieving greater economic integration will require substantially improved regional connectivity and overcoming interstate tensions and mistrust; (ii) The process of economic integration and the

welfare of people should not be held hostage to the resolution of interstate disputes. Indeed, as economic integration is undertaken, new constituencies for peace will emerge that will facilitate the resolution of interstate disputes. Nevertheless, the core issues of cross-border terrorism and outstanding territorialdisputes such as Kashmir must be addressed to establish the basis of lasting peace; (iii) Inspite of impressive economic growth rates in the last two decades, mass poverty persists in South Asia as this region is home to half of the worlds poor population. Therefore, it is necessary to change the structure of the existing elite-based economic growth process which induces increasing income inequalities and constricts the poverty reduction effect of growth. A new inclusive growth process needs to be undertaken whereby the middle classes and the poor can have access to productive resources, high wage employment and equitable access over factor and product markets. Saarc can provide the framework for sharing and pursuing best practices in this regard; (iv) Strengthening democracy by making it more participatory.(11) This involves creating institutional structures for decentralised governance from the federal to the provincial/state, district and down to the grassroots levels: the purpose being to enable people to participate systematically in decisions that affect their economic and social life, their physical security and the life-support systems of the natural environment; (v) Climate change and the expected intensification of existing water stress in some countries of South Asia, food shortages and rising sea levels threaten the stability of economies and societies in South Asia. Regional cooperation to undertake joint adaptation and mitigation measures to face this crisis are therefore necessary. The future of South Asia is delicately poised like a dewdrop on a blade of grass. We need to draw upon our civilisational wellsprings of innovativeness to chart a new course for ourselves and the world.(12)