Rajiv Kumar

1
SAARC Retrospect and Prospects

• Rajiv Kumar
• Director Chief Executive, ICRIER, New Delhi
• Lecture at BIDS, Dhaka, 27 December 2009

2
SAARC Objectives

• Promote welfare of people
• Accelerate economic growth, social progress and
  cultural development
• Promote and strengthen collective self reliance
  among the South Asian countries
• Contribute to mutual trust and appreciation of
  one anothers problem
• Active mutual assistance in economic, social,
  cultural, technical and scientific fields
• Strengthen cooperation with other developing
  countries
• Strengthen cooperation among themselves in
  international forums
• Cooperate with international and regional
  organizations with similar objectives
• Promote and enhance mutual trade (since 1991)

3
Areas of cooperation
4
Institutional Mechanisms

• SAARC Secretariat
• Located in Kathmandu, Nepal
• The Secretariat comprises the Secretary General,
  seven Directors and the General Services Staff
• Seven Technical Committees under the Regional
  Integrated Programme of Action (RIPA)
• Agriculture and Rural Development
• Health and Population Activities
• Women, Youth and Children
• Environment and Forestry
• Science and Technology, and Meteorology
• Human Resources Development
• Transport.

5
Institutional Mechanisms (Contd.)

• Committee on Economic Cooperation (CEC)
  comprising Commerce/Trade Secretaries of Member
  States established in 1991.
• SAARC Chamber of Commerce and Industry (SCCI),
  bringing together the National Chambers of
  Commerce and Industry of Member States,
  established in 1992.
• Eleven Regional Centres run by a Director from
  the host country and staff from the member
  states
• Agricultural Information Centre (Dhaka)
  Meteorological Research Centre (Dhaka) Human
  Resource Centre (Islamabad) Coastal Zone
  Management Centre (Maldives) Information Centre
  (Nepal) Energy Centre (Pakistan) Tuberculosis
  and HIV/AIDS Centre (Kathmandu) Documentation
  Centre (New Delhi) Disaster Management Centre
  (India) Cultural Centre (India) Forestry Centre
  (Bhutan)
• Five Working Groups created in January 2004, to
  take forward collaboration in new and emerging
  areas
• Telecommunication and Information and
  Communication Technology (ICT) Biotechnology
  Intellectual Property Rights (including
  Traditional Knowledge) Tourism Energy.

6
Recent Key Developments

• SAARC STORM Joint programme conducted by India,
  Bangladesh, Nepal and Bhutan to monitor severe
  thunderstorm in the region (2009).
• Telemedicine Project Inaugurated in Bhutan in
  April (2009).
• SAARC Energy Trade Study (SRETS) Completed with
  the assistance of the Asian Development Bank
  (ADB) (2009).
• (Special Meeting of the Working Group to
  examine the trade options identified by the SRETS
  and prepare an action plan)
• SAFAS Agreement on trade in services likely to
  be finalised soon.
• SARSO Agreement on establishment of South Asian
  Regional Standards Organisation signed 4
  countries have already ratified it (2008).

7
Recent Key Developments (Contd.)

• SAARC Development Fund (SDF) Agreement to
  establish at the 15th Summit (2008).
• (SDF now operational and India is the only
  SAARC member to have contributed its full
  commitment of US189.9 million)
• SAARC Regional Multimodal Transport Study
  (SRMTS) by ADB (2007)
• Identified nine pilot, sub regional and regional
  project
• Included road, rail and air links
• Projects to link Afghanistan, Pakistan, India and
  Nepal were identified in second ministerial
  meeting

8
Recent Key Developments (Contd.)

• Regional Food Bank Ratification by members (less
  Afghanistan) to set up with total reserve of 2.43
  ml. tonnes of food stock (2007).
• (Food bank did not prevent the steep rise in
  food prices in 2008)
• South Asian University Agreement for setting up
  the South Asian University was signed during the
  14th SAARC Summit (2007)
• (A project office established in New Delhi,
  India,2009)
• SAFTA Signed in 2004, became operational in
  2006.
• (Intra region trade still very low)

9
Tangible Gains?

• Outcomes not commensurate with official
  statements
• Projects have been identified under Technical
  Committees and Working Groups, but the
  implementation is slow.
• Poor resources and technical capacities to
  monitor and evaluate the activities of the
  Regional Centres.
• The projects of the Regional Centres not demand
  driven
• The SAARC Multimodal Transport Study completed in
  2007 is very promising, but the pace of progress
  is slow.
• Tangible gains though small are confined to
  trade.

10
Outstanding Issues

• Intra-regional trade as a proportion of the world
  trade has remained low, 4.7 in 2008
• Informal trade accounts for 72 (1.5 bn) of
  formal trade in the region

11
Outstanding Issues (Contd.)

• Barriers to formal trade
• Weak port and transport infrastructure
• Restrictive rules of origin
• Persistence of high levels of overall protection

12
Outstanding Issues Barriers to Formal Trade
(Contd.)
Difficult business environment
Source Doing Business Report, 2009, World Bank
13
Outstanding Issues Barriers to Formal Trade
(Contd.)
Large Sensitive lists
Sensitive lists of SAARC Countries
14
Outstanding Issues (Contd.)
Low level of Intra SAARC investment flows
Intra- Regional FDI (2007)
Source ADB (2009)
15
Indias Changing Stance

• From perceiving SAARC as being against its
  interest to a recognition of its assymetric role
• Since the formation of SAARC, neighbouring
  countries have feared Indias hegemony in the
  region
• India now recognises that it should undertake
  asymmetrical responsibility to assuage fears of
  member countries
• Unilaterally reduced negative list of items from
  744 to 480 for SAARC LDCs.
• A task force has been set up by the Ministry of
  Commerce to address NTBs faced by partner
  countries.

16
Indias Changing Stance (Contd.)

• Agreement for setting up the South Asian
  University was signed during the 14th SAARC
  Summit (3-4 April 2007). India has enacted the
  SAU act (2009) and established a project office
  in New Delhi.
• Has agreed to fund the Telemedicine project
  (inaugurated in Bhutan, 2009) and also act as the
  hub.
• Plan to set up 50 automated weather stations in
  Nepal, Bhutan, India and Bangladesh (2009).
• India voluntary allocated 100 million to the
  SAARC Development Fund in addition to the
  assessed contribution (2008).

17
Indias Changing Stance (Contd.)

• Since 2007, India-Bangladesh investment
  restrictions removed.
• India-Pakistan investment decisions now made on a
  case by case basis.
• Residual fears of Indias hegemonic intentions
  need to be addressed.

18
The Way Forward

• Confidence building measures to be undertaken
• Trade expanding measures in place and in the
  pipeline to be pursued with greater vigour.
• Strengthening of the SAARC secretariat by
  bringing in more professional expertise and
  increasing the number of people.
• SAARC process to be made more broad based by
  including professionals, business community and
  civil society.
• Successful completion of agreed initiatives
• Starting the transport corridors identified in
  the SMRTC Study by ADB.
• Early completion of the on going work on
  identifying and eliminating non-tariff measures.
• Measurable indicators to evaluate the goals
  should be initiated.

19
The Way Forward (Contd.)

• The realization that a relative over emphasis
  on border measures discourage regional
  co-operation.
• Regional cooperation needed to address issues
  like poverty, mal-governance and inequitable
  growth.
• Create a better understanding of neighbouring
  cultures and societies.

20
The Way Forward (Contd.)

• India-Bangladesh co-operation can set a new
  paradigm for SAARC integration.
• Recent Initiatives
• India has agreed to offer transit facilities to
  Bangladesh to access Nepal Bhutan.
• Both sides agreed to movement of containerised
  cargo by rail and water for bilateral trade
• Bangladesh agreed to provide access to Ashuganj
  Port as a new port of call as well as the use of
  Chittagong port by India
• Both sides have agreed to enhance cooperation in
  the power sector and India has agreed to provide
  at least 100 MW to Bangladesh on a priority
  basis.
• The renewal period of the Protocol on Inland
  Water Transport and Trade, which governs the
  bilateral movement of goods through inland
  waterways, has been extended from one month to
  two years

21
The Way Forward (Contd.)

• Joint approach to Multilateral Development Banks
  for regional cooperation required.
• Re-explore sub-cooperation among the four Eastern
  member countries
• Encourage cross-border cooperation between
  neigboring countries.

22

• Thank You

23
Drivers of Integration
24
Economic Non-Traditional Gains

• Greater regional output and resource utilization.
• Significant expansion of intra-industry trade and
  commerce.
• Geographical specialization across the region
  esp. in agricultural sector.
• Greater investment flows due to the creation of
  larger market.

25
Political Strategic Gains

• Large country-small country dynamics.
• Large countries build new geopolitical alliances.
• Small countries learn to effectively deal with
  larger trading blocs in multilateral
  negotiations.
• A unified market for hydrocarbon imports from
  Central and West Asia.
• Negotiating advantage in multilateral forums.

26
Political and Strategic gains (contd.)

• Potential gains through alliance with Central
  Asian countries Afghanistans membership
• Energy trade
• Confidence-building measure
• Lock-in mechanism

27
Developmental and Environmental Efficiency Gains

• Integrated approach towards provision of regional
  public goods like-
• Environment
• Water conservation
• Infrastructure
• Natural resources including regional ecosystems
  and related bio-diversity.
• Tackle the negative externalities-
• Drug and human trafficking
• Floods, pandemics
• Ecological degradation

28
Non-economic gains

• Politically stable and tension-free region would
  result in
• Greater FDI, remittances
• Low defense budgets