South Asia is one of the most important regions in the world in terms of human capital and business development. The most important factor in this is the unified status of this region as for centuries it was part of same rule, ruled by Mughals and many other dynasties and then English rule. All the seven countries that make South Asia separated nearly 60 years ago from one communion or colony. The internal rift emerges from that part and the regions two big countries have ideological differences and that became one of the major reasons for partition.
After the partition Bangladesh emerged as the third power after separating from Pakistan and this changed the balance of power in the region to some extent and cooled down the animosity to some extent between the two major players Pakistan and India. During that brief period of peace the leaders of the region started SAARC (South Asian Association for Regional Cooperation) with good wishes, it was done at a time when European Union was strengthening and Margret Thatcher was up in arms against the EU. It was the most risky venture the region could have taken as the personal animosity of three major countries could put the idea on a complete hold. India and Pakistan if they stop talking SAARC is shelved, and if Bangladesh gets Awami League government the idea is back on shelf again no matter how important it could go.
The idea of SAARC was for broader cooperation and to allow a bigger role for the private sector. But after passage of nearly three decades analysts are calling SAARC ineffective and unrealistic. For starters, although South Asia is on a growth trajectory led by the private sector, SAARC still does not have an official mechanism to incorporate business and trade inputs into regional trade talks.
It is a common thought among the member states that SAARC is out of touch with the region’s economic realities and economic trends. Some claim that the private sector in the region has gone beyond regional trade, and the members’ countries should look at investing in Africa and penetrating western markets. To some extent it is true that why should businesses pay much attention to regional bickering and why should they mess about with regional integration when they can go straight for the jugular, they want to go global. This is a direct result of infighting between the member states and ineffective policymaking and always putting SAARC at the back burner of all the issues. There is a ‘conspicuous’ absence of the private sector even in SAARC trade negotiations.
The lack of private sector in the SAFTA process is the biggest stumbling block as in the new setup governments hold very less leverage over private sector and an individual business is less bound by the governments. SAARC has repeatedly ignored the involvement of private sector and it still fails to recognise its expanding role in the new economic system. On the other hand trade is by the private sectors in all SAARC countries. The scope of SAARC Chamber of Commerce and Industry is very limited. It lacks any formal mechanism to incorporate feedback from the private sector.
When SAFTA was signed it was thought that the agreement would help boost the trade within the region and SAARC countries but implementation on this landmark agreement is very slow. Majority of trade within SAARC is not free and the agreement is yet to prove its worth. Factually over half the items traded among SAFTA countries are still in negative lists and do not get duty concessions, let alone duty free access into each others countries. Around 53% of total intra regional imports among SAFTA countries are subjected to negative lists.
Implementation of SAFTA began in 2006, and it is the end of seventh year since. The next step in this line was supposed to be the development of customs union by 2015 and by 2020 the development of economic union. Yet with current slow pace of implementation it is expected that SAFTA itself would be fully implemented by 2016. Putting all the other plans on shelves for another couple of decades. The situation regarding SAFTA is so bad that there is no mechanism to reduce non-tariff barriers faced by businesses trying to use the SAFTA.
In realistic terms SAARC countries should start opening up services and investments to each other. With an increasing cross border investment services are already gaining in share of GDP among South Asian countries.
The biggest hurdle in this way is the political administrations will to move things faster. SAARC ministers worked on developing capital markets in the region and an agreement on investments was discussed in the past. SAARC Commerce Ministers have already called for an ‘urgent review’ of the negative lists under the SAFTA, but still the progress on that front is very slow. Creation of a SAARC Development Fund was also discussed and proposed.
On the other hand major obstacles to regional integration, such as security concerns were also under discussion. It is no secret that some of South Asia’s bilateral and perceived security concerns have impeded closer economic integration. There are issues on even the basic forms of connectivity of transportation links. Now these all issues are on the table under composite and issue specific dialogues, which would facilitate faster, smoother movement of goods across borders. But it is still a lot of talking, meeting and drafting and very less progress on the practical front.
The development of the SAARC region could improve immensely if Pakistan, India, Bangladesh and Afghanistan work closely and pull others around. The recent signing of TAPI (Turkmenistan, Afghanistan, Pakistan India) pipeline and Afghan Transit trade through Pakistan from India is a step in the right direction. There are a lot of ways relations between SAARC nations could be improved. Other countries in the region could benefit from these agreements too. If Pakistan and India could sign these two agreements then there are huge possibilities of extending the cooperation to other member states too. It still need the political will of the member nations specially the big three to move the process and the whole region will benefit from the results. The amount of resources human and natural present in the region is enough to sustain the development of the region for this whole century. The future of generations lies in the hands of those who hold power now.
Note: This article was published in ICE Business Times Bangladesh