Pakistan is the Spanner in South Asia’s Works

Although the 14th summit of the eight-member South Asian

Association for Regional Cooperation summit in New Delhi last week raised hopes

hope that finally the politics and economics of the region would be transformed,

it is going to take a long time.

The primary reason is Pakistan’s increasing instability after

the sacking of Supreme Court Chief Judge Iftikhar Mohammed Chaudhry, for

“misuse of authority,” by President Pervez Musharraf, which made it necessary

to bring the issue of Kashmir, however obliquely, back to the association forum

and to put economic cooperation on the back burner. The suspension in early

March triggered protests and has snowballed into a political crisis for

Musharraf in the run-up to his expected attempt to seek another term.

Trade, terror and connectivity were the major themes of this

year’s summit. It was thought cooperation would bring the region closer and

improve the living conditions for millions of people through a South Asia Free

Trade Agreement (SAFTA). It is not the case.

Intra-regional trade is crucial for the continued economic

upsurge of the region. The absence of most-favored nation status between Pakistan and India

has kept intra-regional trade at about five percent of South

Asia’s total trade. The World Bank has some revealing statistics

that highlight the challenges for closer regional cooperation in South Asia. According to the bank, intra-regional trade

is less than 2 percent of GDP, compared to more than 20 percent for East Asia. The

cost of trading across borders in South Asia

is one of the highest in the world. The region has minimal cooperation in the

field of energy, despite India,

one of the most energy-hungry nations in the world, being situated next to

three energy-surplus countries ‑ Bangladesh,

Nepal, and Bhutan.

All the member countries have implemented SAFTA in full,

except Pakistan, which is

still trading with India

on the basis of a “positive list” of items. When SAFTA came into effect in June

last year, Pakistan allowed

tariff reductions on the import of 4,872 products from Sri Lanka, Bangladesh,

Bhutan, Nepal and Maldives

but limited India

to concessions on 773 items. In November last year, it expanded this list to

1,075 items.

India on

the other hand has offered most-favored nation status to Pakistan and expects reciprocity, which Pakistan

so far has refused. Pakistan

wants the resolution of the Kashmir issue

first before moving wholeheartedly on SAFTA, which has kept the trade agreement

in limbo. Though SAFTA has been implemented from June last year, south Asia has not been able to draw the full benefits of


Throughout its history, the association has been hamstrung

by the Indo-Pakistan rivalry. However, in recent times it has managed to

somewhat improve its image especially after the ongoing composite dialogue

between India and Pakistan. Perceptions

about the association have also changed because of the expansion of the

organization and inclusion of Afghanistan

as the eighth member. Moreover, this was the first time that five observers ‑ China,

Japan, South Korea, the United States and the European Union – attended the

summit's opening and closing sessions and some meetings as observers. Iran

has also been added to this list of observers.

There have been some positive moves. Outside the

association, although there has been little movement on Kashmir, Indian and

Pakistani officials were meeting late last week to seek ways to resolve border

disputes in the Siachen glacier area in the Himalaya

and the Sir Creek marshland, the 11th round of talks between the

defense secretaries over the 23-year history of the Siachen dispute. The two

nuclear-tipped countries have fought three wars since 1947, two of them over Kashmir.

Hopes were thus increasing that the organization could

disentangle itself from the Indo-Pakistan rivalry and give a major impetus to

trade and economic relations. But this did not happen. Pakistani Prime Minister

Shaukat Aziz stymied the chance of any progress even before reaching New Delhi. On the eve of

the summit, in an interview in Islamabad he said

that for Pakistan, Kashmir was still the core issue.

In New Delhi, addressing the summit,

Aziz, without naming Kashmir, said it was

essential to remove "obstacles of the trust deficit which has hampered

meaningful cooperation in the region". He pointed out that the South Asian

grouping has failed to make the desired progress due to an "environment of

disputes and mistrust" and called for resolution of differences and

disputes through "dialogue and compromise".

He agreed with the association’s goals rhetorically, saying there

should be enhancement of trade and economic activity, which "must show

sensitivity to the need for creating a level-playing field, market access and

requirements of development in each member state." He favored a "truly

open environment for regional trade ‑ devoid of all types of barriers." He

backed a level playing field for a "truly effective regional division of

labor and production.”

India, on

the other hand, contented itself once again by granting unilateral favors,

though this time only to the least-developed, announcing that it will allow

zero-duty access to the least developed countries of South

Asia by the year-end.


also made other concessions to increase connectivity in South

Asia, in keeping with one of the major themes of the SAARC summit.

It announced unilateral liberalization of visas for students, teachers,

professors, journalists and medical patients from SAARC countries. It also

proposed to double the intra-SAARC flow of tourists in the next five years.

There was a definite change in the attitude of India,

which wanted to bring the region closer. Some thought that attitude was due to

newfound confidence because of India’s

economic growth, while others considered it a “soft Indian” policy to increase

its influence in a region where China

is gradually extending its reach. Whichever, it appears clear that India

this time wanted to walk the extra mile to make the conference a success.

Economic integration and across-the-board implementation of

the South Asian Free Trade Area (SAFTA) hold the key to unlocking the economic

potential of the region. In their report before the New Delhi summit, the foreign secretaries

recommended early and full implementation of the South Asian Free Trade Area

and finalizing a draft agreement on the promotion of investment in the region.

These recommendations, though, are of no use unless the leaders are willing to

accept them.

Sri Lankan President Mahinda Rajapaksa said that it was high

time there was a single South Asian currency to “enhance the productivity of

the region and improve trade without barriers.” He expressed his concern at the

failure of SAARC to realize its potential. He also sought “a sincere commitment

and a strict timetable” to implement the South Asia Free Trade Agreement

(SAFTA) to make South Asia “one massive region

for enhancement of trade.”

For the last 22 years SAARC has been a paper-shuffling

organization. On the eve of the New

Delhi summit the grouping was poised to intensify

economic cooperation. It was hoped that this time it would be transformed from talk

to implementation. These hopes were

dashed due by Pakistan over Kashmir, though in a roundabout way.

By talking of Kashmir on such occasions, the rulers of Pakistan manage

to serve their short term interests, but it has made their country and the

region suffer. So SAARC, for the time being, remains jinxed and will remain so

until Pakistan

becomes stable enough to risk crossing its borders for trade. A weak Pakistani

leadership concerned about its own security will never have the courage to take

those steps.

Anand Kumar is an

independent researcher/writer based in New