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                            SAARC: FROM SAPTA TO SAFTA
                                  ECONOMIC RATIONALE
More than anything else, it was the expected gain to all the member countries of the South
Asia that triggered the formation of SAARC. Most of the seven members have similar history
and socio-economic and cultural background. Being in a compact geographical area, mutual
trade in these countries could prove economically beneficial to all of them. Hence, the thrust
of the regional cooperation was mainly on economic cooperation.

But, unfortunately, while the regional cooperations like the Association of South East Asian
Nations (ASEAN), North American Free Trade Area (NAFTA) and European Union (EU) have
taken off very well, and are serving the economic interests of all member countries, SAARC
has failed to milk any gains. Most of the SAARC Heads of the States/governments conceded
at Kathmandu summit that SAARC had failed the people of the region.

It is in the interest of all member nations if regional cooperation is achieved in South Asia.
Almost all member countries have large percentage of their population living below poverty
line and free trade in the region, along with regional cooperation, would help all such people.
In terms of imports and exports, Bangladesh and Sri Lanka are India&Mac226;s biggest
trading partners in the region. While the total volume of trade with Bangladesh in 1999-2000
was Rs 3117.58 crore, the same with Sri Lanka was Rs 2388.95 crore. The total trade
between the SAARC nations, however, is less than one per cent of the total world trade, which
is a matter of grave concern to a region representing more than one-fourth of total world
population.

Most of the SAARC nations have their biggest trading partners outside the region. For
example, for importing tea, coffee, sugar and bicycles many countries of the region, including
Pakistan, look to countries of Africa, Asia or Latin America. This not only results in reducing
the intra-regional trade, but also increases the cost of imports on account of additional freight
and time involved. All the countries in the region are capable of supplying many agro-based
and mineral-based raw materials to each other, but political and diplomatic considerations
continue to prevail upon the collective economic interests of the region. In the fields of
biotechnology, Information Technology and education, India is much ahead of other countries
in South Asia and all other Members can gain immensely by India&Mac226;s achievements.
But not many countries of the region are coming forward to share these gains mutually.

Bilateral Gains

Being two largest countries of the region, gains for India and Pakistan could be immense. But
ever since the formation of SAARC, the relations between the countries have continued to be
strained, irrespective of the fact whether there is a democratically elected government or a
military dictatorship in Pakistan. It appears that criticising India has become the most
favourite pastime of the rulers in Pakistan. To overcome their own weaknesses of misrule and
lack of economic development the people at the helm of affairs in Pakistan time and again
raise the issue of big brother&Mac226; attitude of India and arouse the passions of common
man. Peace initiatives of India like that of Samjhauta Express, Lahore-Delhi bus service and
Agra Summit, have been completely ignored, resulting in a serious diplomatic stand-of Indian
Tendu Leaves, Films, music cassettes etc are in great demand in Pakistan. Negative attitude
of successive Pakistan governments has only resulted in stepped up smuggling of these items
from India and both the countries are loosing out substantially in terms of duties. The


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common man in Pakistan is also required to pay through           his nose for these commodities. In
addition, India is much ahead of Pakistan in production          of agro-based goods, automobiles,
engineering goods, textiles, cement, pharmaceuticals              and consumer goods. All these
commodities can become available to Pakistan from India          at much cheaper rates if leadership
in Pakistan sheds its anti-India posture and tirade.

Culturally and educationally also, Pakistan would stand to gain. There are many Urdu writers
of prominence in India. Good relations between the two countries would act as a bridge
between the writers and readers of Urdu and Punjabi on both the sides. National School of
Drama in India gets students from Nepal and Bangladesh. Similarly, engineering, medical
education, IT-related education, management studies and architecture studies are certain
areas in India that attract students from all over the world. Pakistani students could also gain
tremendously if relations were to improve.

Gain for India would be no less. Economic cooperation among the two countries would ensure
that oil and gas pipelines from Iran and other middle-east and central Asian countries could
pass through Pakistan to India, making the supply of crude oil and other petroleum products
cheaper for India.

List of mutual gains to both the countries could be quite long. India spends $ 13.63 billion per
year on defence, while this expenditure for Pakistan is $ 3.3 billion. These figures form
substantial percentage of the GDP for both the countries. Peaceful relations could help in
scaling down the defence expenditure considerably, and the saved funds could be channelled
into the socio-economic development. Even diplomatically, while India could be
Pakistan&Mac226;s gateway to south-east Asia, Pakistan could act as a bridge between India
and the gulf countries. This would not only promote diplomatic relations of the two countries
with these countries, but would also promote their foreign trade by cutting on freight and
transportation costs. Officially, the total volume of trade between India and Pakistan is around
$ 200 million, but unofficially the total volume of trade is well over $ 1 billion. This trade could
be legalised, resulting in more revenues for both the neighbours.

The roadmap to such cooperation is simple to draw. Pakistan has to exhibit sincerity by
withdrawing all the support to the Kashmiri terrorist outfits operating in India or Pakistan.
Further, without quoting Kashmir as a pre-requisite for any talks, both the countries must
begin to negotiate at economic, cultural, political and diplomatic levels. Such negotiations
could be supplemented by annual summits of Heads of State, in addition to the SAARC
Summits.

Call For SAFTA

SAARC Summit at Kathmandu ended with at least one positive conclusion. The Joint
Declaration included a call for a Treaty on Free Trade in the region, to be called South Asian
Free Trade Agreement (SAFTA). It is also implied that once SAFTA becomes a reality, there
would be no inter-border checks and zero customs duties on each other &Mac226;s products.
SAARC Council of Ministers has been asked to prepare a draft Treaty on SAFTA by the end of
2002. The Summit also called for eventual South Asian Economic Union. All the Member
nations have been asked to harmonise their trade policies to dovetail the regional goals with
their developmental plans. Indian concern on finance and investment was also well received
at the Summit. The Declaration also called for joint infrastructure, air linkages and simplified
administrative procedures



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But, considering the poor track record of the SAARC nations as a group, in translating such
declarations into action, it appears highly unlikely that the objective of preparing a draft
treaty would be achieved and the said Agreement would be signed within the given time
frame. Even the South Asian Preferential Trade Area (SAPTA) has not yet become a reality.
SAPTA was signed in 1993 at Dhaka Summit, and provided for a broad framework of rules,
with a view to achieving phased liberalisation in inter-regional trade, trade concessions,
granting the Most Favoured Nation (MFN) status to each other and lifting of non-tariff barriers
like quotas. Under the existing circumstances, if SAFTA is formed, Pakistan may not gain from
it due to its stubborn attitude, but it would certainly benefit countries like Bangladesh, Sri
Lanka, Bhutan and Nepal, who would have a much better access to the Indian market, both
for imports as well as exports.

It was mainly due to virtual failure of SAPTA that India looked beyond the region to another
regional economic cooperation called BIMSTAC, which includes Bangladesh, India Myanmar,
Sri Lanka and Thailand. India is also keen to join the ASEAN to pursue its economic goals.
Member nations of ASEAN, like Thailand, Malaysia and Singapore, are among the rapidly
growing economies in the world. Besides, China now has access to most of the ASEAN
countries and some of the members of this grouping are keen to use India to neutralise the
Chinese influence in the region. In this direction, first India-ASEAN Summit is likely to be held
shortly, in which India may offer individual and collective free-trade agreements to all South
East Asian nations. India&Mac226;s keenness to have free trade arrangement with the ASEAN
nations is, in fact, a reflection of failure of SAARC countries to implement SAPTA.

Time has come for all the SAARC countries to understand the ground reality. Notwithstanding
the formation of the World Trade Organisation (WTO), no region can flourish economically
unless there is fruitful economic cooperation within the region also. South Asian nations must
learn from their mistakes. Kashmir is a bilateral issue between India and Pakistan. It is high
time that Pakistan understood that bilateral relations and regional economic cooperation are
two different issues and must not be mixed. If Pakistan does not mend its ways, the other
members must take steps to exclude it from SAARC. One country should not be allowed to
hold the entire region to ransom. The SAARC countries must understand that as a group their
voice would be heard more attentively at various international fora, including the WTO. SAFTA
must, therefore, be implemented within the given time frame.




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