The future of SAFTA


by Anu Mahmud


The necessity of promoting bilateral and regional cooperation in trade, investment and industry is more intensely felt in today’s fiercely competitive world because the powerful trade blocs are marginalising the developing countries. The developing economies that are pursuing liberal economic and trade policies are now facing an adverse global environment where free trade is being endangered by managed trade. The stronger economies grouped in powerful regional blocs like NAFTA, EU and APEC are protecting their markets through managed trade. The partners of such economies blocs are trading major parts of their international trade within their respective regions to avoid external competition.

This is why the developing countries face scores of problems in entering those markets. Such countries should intensify their campaign for duty free access to European and North American markets in order to face the challenge. Also efforts for developing trade and investment within their respective regions should continue. Many countries in Asia and Africa are pursuing this strategy and have been reaping the benefits from globalisation. But countries in South Asia could not develop the cooperative efforts to promote trade and investment. It is most unfortunate that the volume of trade declined after launching of the South Asian Preferential Trading Arrangement (SAPTA). The volume of trade between Sri-Lanka and Bangladesh declined by 50 percent during the last 10 years.

Unfortunately, such a decline in trade and investment is common to all seven countries of South Asia that were grouped in SAARC 17 years ago to promote economic cooperation among them. But the situation, far from improving, has further deteriorated in terms of cooperation for increasing trade and investment. The Sri Lankan minister who recently led his country’s trade delegation to Bangladesh disclosed that his country spent only five per cent of $1150 million that was being spent annually for importing raw materials from Bangladesh for apparel industries. The minister found many such materials in Bangladesh. But there was no move by both the countries to promote trade in this field. The same is true in case of other countries too.

Despite having the scope for promoting intra-regional trade and investment, the countries in South Asia are trading with others that are far away from the region. Such trading partnership invariably raises the cost of transportation and it takes longer time for transportation of cargoes to a distant country. The objective of promoting regional trade is to cut shipment and transportation costs and help each other in the region to develop their economies. But this is absent among the SAARC countries.

While the hope for promoting intra-regional trade and investment has been fading, neighbouring Sri Lanka has come forward with certain proposals for increasing Dhaka-Colombo cooperation that can end the disappointment to a great extent. Bangladesh should seriously consider the Sri Lankan proposals to work together bilaterally for economic development by utilising the resources ofthe two countries for mutual benefits. In the context of failure by SAARC and SAPTA to promote intra-regional trade and investment, all countries in the region should now think of expanding bilateral partnerships with the neighbours. The Sri Lankan proposals to expand bilateral cooperation in the fields of tourism apparel sector and capital market should be given a concrete shape through exchanges of trade delegations and intensifying commercial diplomacy. It should be quite lucrative for Bangladesh to enter the Sri Lankan market for exporting accessories for apparel industries.

The SAARC countries should also find ways to increasing trading within the region that could be a multi-billion dollar trade only in the apparel sector. There are also many other areas where cooperative efforts could benefit every country.

The 11th SAARC (South Asian Association for Regional Cooperation) summit ended at Kathmandu, Nepal on January 6, adopting the 56-point Kathmandu Declaration expressing the determination to accelerate cooperation among the South Asian countries in the coming days for common benefits. The seven leaders of South Asia endorsed the economic programmes for implementation by SAARC in core areas of trade, finance and investment. The declaration called for smooth transition to South Asia Free Trade Area (SAFTA) to facilitate intra-regional trade and stressed equitable distribution of benefits of trade. It called for efforts to alleviate poverty in South Asia, the home to the largest concentration of the poor. Investment in this sector, it stressed, would contribute to social stability. The seven heads of state and government of the region reiterated call for completing the draft Social Charter document in time for the next session of the SAARC Council of Ministers meeting. They called for implementation of the two conventions they signed for preventing and combating trafficking in women and children for prostitution, and welfare of South Asia. The declaration called for efforts for human resource development, advancement of women and children as well as elimination of child labour from South Asia. The South Asian leaders agreed to accelerate economic cooperation to realise the goal of a South Asian Economic Union (SAEU) ‘to give effect to the shared aspiration of a more prosperous South Asia.’ The declaration underscored the importance of annual summits in charting common strategies for realisation of the objectives and principles set out in the charter of the regional association.

The SAARC charter puts thrust on the holding of annual summits for accelerating economic cooperation in the poverty-stricken region. The 11-page Declaration stipulated the goals of regional cooperation in the economic sector, poverty alleviation, cooperation in education, international politics and economic environment. The other goals are security of small states, eradication of terrorism, report of the Group of Eminent Persons (GEP), enhancing political cooperation and setting up a South Asian Development Fund. Developments on the sideline of a summit sometimes assume as great an importance as the summit itself. This is particularly true in a summit like the Kathmandu SAARC meet where two of the summit partners are precariously close to a war and the whole atmosphere is charged with tension. Through the SAARC summit was due in 1999, uncertainty arose over the holding of the 11th SAARC summit in Kathmandu because of India’s unwillingness to do business with the military leader of Pakistan. Subsequent events, especially those after September 11,2001, further embittered bilateral relations and the December 13 terrorist raid on India’s parliament building brought the two nuclear neighbours on the verge of a war. Presumably it was international pressure on both the countries that averted what could have been a disastrous showdown. As the Chinese Foreign Minister Tang Jiaxuan Tang said, if a large-scale armed conflict were to result, not only would both India and Pakistan suffer, the peace process in Afghanistan would be halted and stability and development of South Asia, even of all Asia, would be endangered.

There is reason to believe that the pressure of China and USA and the visit of the British Prime Minister Tony Blair have had a positive impact. A happy prelude to the summit was that the Foreign Ministers of India and Pakistan smiled and shook hands in Kathmandu three days ahead of the summit even while grenades were detonated near the legislative assembly in Srinagar and people were wounded. In this context any talk or exchange between the leader of India and Pakistan on the sideline of the SAARC summit has a crucial significance. Curbing terrorism, it may be mentioned, is the main agenda of the SAARC summit. The Pakistan President Pervez Musharraf, undaunted by India’s refusal to hold talks, grasped the Indian Prime Minister Atal Bihari Vajpayee’s hand in a surprise gesture on the podium where other South Asian leaders were seated and Vajpayee smilingly returned the handshake to loud applause.

The end of the 11th summit of SAARC heads of government in Kathmandu gave people a certain sense of relief. There was always the fear after the sudden spurt in tension between India and Pakistan. After the summit it is time for all member-states of the organisation, and especially for their leaders, to define anew the modalities on which SAARC will operate in future if it wants to be an effective organisation. There is the SAARC charter which in itself remains imprisoned within its own terms of reference. But that ought not to be an impediment to qualitative improvement in other ways.

One way should be dealing with the nature of conflict between India and Pakistan which by far remains! the most influential among the seven member-states. The very unfortunate fact of SAARC history has been the sadly consistent manner in which problems between Delhi and Islamabad have ceaselessly come in the way of a movement forward for the body. Matters would surely be helped considerably had the charter of organisation permitted deliberations on bilateral issues. That is why SAARC remains stuck, as it were, in a narrow circle. And let it not be forgotten that for all the ambitious goals originally enunciated by SAARC, the nuclearisation of the South Asian region has gone on. That in turn has led to other complications, all of which have prevented the regional body from following a course similar to that pursued by Europe or, closer to the region, ASEAN. At the risk of sounding pessimistic, one need hardly point out that beyond a certain number of inane or watered down resolutions and declarations, SAARC has achieved little.

It is important for all seven member-states to go into the business of how to reinvent SAARC. There must be some-thing a whole lot more than a gaudy gathering of personalities on a seasonal basis about an organisation which has as its goal the uplift of millions of South Asians.

Source: The Independent, Dhaka, March 10, 2002

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