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Dhaka SAARC Summit: Political Compulsions Blunt Economic Progress

Cmde C. Uday Bhaskar (Retd) is former officiating Director of Institute for Defence Studies and Analyses, New Delhi.
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  • December 08, 2005

    The 13th SAARC summit concluded in Dhaka on November 13 with a declaration, which notwithstanding its rhetorical flourish and ambitious objectives, reflected the structural constraints that have hobbled the organization for two decades and are likely to do so for the near future. SAARC which was conceived in Dhaka in 1985 returned to the Bangladesh capital after 20 years but the primary objective of strengthening regional co-operation with a focus on accelerating economic growth, such that the human security indicators and welfare of the people are visibly improved remains as elusive as it was two decades ago.

    Much of this stasis emanates from the distinctive characteristics of SAARC as an entity and the existential reality that India is both the link to all the other members in a geographic sense and overwhelms the rest of the group in more ways than one. Consequently there is a deep-seated anxiety and historical animosity among countries such as Pakistan, Bangladesh and Nepal whose elite have nurtured a socio–politico and security discourse for decades, that casts India in the role of the historical 'enemy' or potential adversary as the case may be. Sri Lanka, Maldives and Bhutan represent a more positive texture vis-à-vis India and they have individually strengthened their bi-lateral ties with Delhi and benefited in the process.

    Hence the domestic discourse and perception in one spectrum of SAARC is that trade and economic co-operation can only follow the political orientation towards Delhi and this was much the tenor of Pakistani PM Shaukat Aziz's response when at the end of the Dhaka summit he noted that unless Kashmir is resolved, there could be no meaningful movement on other forms of regional co-operation envisaged by SAARC. The historical irony is that in 1947, when the sub-continent was acquiring a new political identity post partition, the prevailing international global trade arrangement – GATT – noted that given the economic and trade complementarities that existed and the natural rhythms of commerce that had been embedded for centuries, a separate provision was made for India and Pakistan – which then had two wings – West and East Pakistan (later Bangladesh after 1971). Article XXIV of GATT noted at the time that: "Taking into account the exceptional circumstances arising out of the establishment of India and Pakistan as independent states and recognizing the fact that they have long constituted an economic unit, the contracting parties agree that the provisions of this agreement (GATT) shall not prevent the two countries from entering into special arrangements with respect to trade between them, pending the establishment of their mutual trade relations on a definitive basis."

    The historical record suggests that the ruling elite in Pakistan and later Bangladesh have worked towards the opposite objective – which is to steadfastly reject any form of mutually beneficial bi-lateral or multilateral trade arrangement with India and hence both SAPTA and SAFTA remained congenitally stillborn or effete. The blunting of economic opportunities on the political anvil and the converse example are reflected in the trajectories of SAARC and ASEAN respectively in the period 1980 to 2003. Total merchandise exports within the block – US $664 million (1980) and $4,773 m (2003) for SAARC and $13, 350 m and $104, 872 m for ASEAN. These export figures represented 5.2 per cent of total block exports in 1980 and declined for the next two decades to 4 per cent and is now 5.6 per cent in 2003 for SAARC. Intra block exports for ASEAN on the other hand moved from 18.7 per cent to 23 per cent in the same period. With ASEAN poised to engage with the East Asian bloc in a more structured manner, it is axiomatic that there will be greater economic impetus and vitality to that entire region and the tenet that sound economics can be separated from contested politics is best exemplified in the case of the strong Sino-Japanese trade and investment links and in the even more remarkable China-Taiwan relationship.

    Regional trade arrangements (RTA) have grown six fold the world over, in the last quarter century to the mutual benefit of all the constituent members and in many ways SAARC is the stubborn exception to the rule. However the silver lining in the SAARC experience is the nature of the bi-lateral trade arrangement among some states. The best illustration is that of the India-Sri Lanka Free Trade Agreement that was signed in late 1998 and brought into force in early 2000. Despite the turbulent political context relating to the IPKF experience when Delhi and Colombo were at cross-purposes, the political leadership in Sri Lanka arrived at a consensus that the island's economic future would be better served by closer links with giant India.

    The trade and economic figures of the last 15 years more than substantiate this conviction. Sri Lanka's exports increased from US $2.3 billion in 1990 to $6.5 billion in 2003 and currently Sri Lanka has the highest per capita GNP within SAARC at US $930. (India, Pakistan and Bangladesh have per capita of $540, 520 and 400 respectively). The tangible benefits for a smaller economy which enters into a RTA with a larger partner are discernible in the disaggregated figures of GDP in the case of Sri Lanka. While GDP moved from $8.03 b in 1990 to $18.23 b in 2003, the share of agriculture dropped from 26 per cent to 19 per cent while that of services increased from 48 to 55 per cent. (All figures from World Bank WDI Report 2005.)

    On current evidence despite the Dhaka Summit determination to bring SAFTA into force by 01 January 2006 – which is less than two months away – it is more likely that SAARC will be weighed down in reaching procedural consensus since there is little or no political will among the major states to engage with India. The only significant movement in Dhaka has been in expanding SAARC to admit Afghanistan and this has not been devoid of deeper political considerations. Nepal ensured that the admission of the new member was linked to the observer status of China (and Japan) in SAARC. However the impact of the two Asian economic heavyweights on the SAARC bloc will be a function of the manner in which the bi-lateral relations that obtain between Delhi and Beijing develop.

    Thus despite pious and earnest hope, the irrefutable logic of regional economic co-operation will be stunted by the glass ceiling of domestic political discourse in SAARC and the troubled legacy of revisionist colonial history that is still burdened by the cross of 1947.