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SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION

ABSTRACT:
One of the significant efforts in South Asia towards regionalism in 19th century is the formation of the regional block SAARC- the South Asian Association for the Regional Co-operation in 1985. The SAARC--regional block was created to achieve better standards of living for the people of South Asia through greater development. However, the performance of SAARC in the most crucial area of economic cooperation has been far from encouraging. For the very same reason it is impossible to overstate the importance of SAARC regional grouping in Asia. This report makes an attempt to analyze the performance of SAARC as a regional block, and its future trade among the member states. This report focuses on the areas where the organization is lacking and offers some solutions and suggestions in the form of recommendations that must be taken into consideration to speedup the process of regionalism in South Asia.

INTRODUCTION:
Richness in material and human resources has warranted a constant interaction between countries in South Asia and the outside world. South Asian states have also been aware of their geopolitical advantages and the need to integrate into a regional force. Efforts were made early1 to create institutional mechanisms for regional integration to enable the fostering of a common regional identity and a cooperative growth strategy making optimum use of interregional trade and social and political development. A culmination of such an understanding was the creation of the South Asian Association for Regional Cooperation (SAARC). Created in 1985, SAARC follows the principles of: focus on social and economic matters; decisions by consensus; and non-discussion on contentious bilateral issues. According to the SAARC Charter (1985) member states are desirous of peace, stability, amity and progress in the region through strict adherence to the principles of the United Nations Charter and Non-Alignment, particularly respect for the principles of sovereign equality, territorial integrity, national independence, non-use of force and non-interference in the internal affairs of other States and peaceful settlement of all disputes. This

charter was signed by heads of states of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, in 1985 in Dhaka. Over the years, SAARC has attempted to address several regional concerns, for instance drug and human trafficking, economic cooperation among south Asian states and the forging of a south Asian social identity and most recently efforts have been made to tackle the menace of terrorism in the region. The proliferation of regional trade agreements all over the world in the side lines of liberalization of international trade in the 90s created a consensus to increase trade integration among SAARC countries. This led to signing of South Asian Preferential Trading Agreement (SAPTA) in 1993. SAPTA came into force in December 1995 after the conclusion of first round of negotiations in April 1995. In December 1995, it was also decided to create South Asian Free Trade Area (SAFTA). The SAFTA agreement was signed in January 2004 among its seven partners, i.e., India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives, and came into force in January 2006. In addition to SAFTA other bilateral trade agreements (BTA) were signed between 2003 to 2009. Pakistan SriLanka BTA (2005) and India Sri-Lanka BTA are the agreements between the major economies of South Asia. Since its existence in 1985, SAARC has been criticized for its failure to forge an effective regional identity. Inter-state conflicts and the bilateral interests of member states have a decisive influence on the achievements of SAARC; the regional body has also been influenced by external players and other regional organizations. In an interdependent and swiftly globalizing world, it would be unrealistic to believe that SAARC can prosper in isolation. South Asian integration efforts are often influenced either directly or indirectly by great power politics and alliances in other regions. It has now become necessary for SAARC to rise above bilateral conflicts and to foster closer relationships with other regional and international organizations, in order to evolve into an effective regional organization.

REVIEW OF LITERATURE:
There are several related previous studies investigating the interdependence relationship among the South Asia countries. Rajapakse and Arunatilake (1997) investigated the impediments to intra SAARC bilateral trade from Sri Lanka perspective. Although there is a large potential for bilateral trade improvement with

removal of trade restrictions, nevertheless, none can achieve sustainable economic growth via solely on intra trading. They suggested that the stability in economic and political climate is crucial in providing conductive investment that may expand the trade activities. Meanwhile, Jain (1999) proclaimed that establishment of South Asian Free Trade Agreement is essential in providing mutual beneficial for member countries. In addition, flexibility and tolerance are concern where larger countries indicate willingness to be sensitive towards the needs of smaller neighboring countries. Subsequently, Hassan (2001) stated that the intra trade SAARC countries were unfavorable in relative to other existing regional blocs and yet to achieve trade creation benefit. Khan and Khan (2003) declared that institutional changes for promoting economic development in South Asia is necessary to ensure a dynamic outward oriented development in those countries. They also agreed on the approach of open regionalism and continent integration in Asia. In related to that, Saxena (2005) examined the possibility of the seven South Asian countries in establishing an optimal currency area. The findings indicated that the spillover benefits of forming a common currency would accumulate from the peace that economic integration would bring between India and Pakistan. Although, the finding proclaimed that those seven South Asia countries were not ready for a common currency area, however, there is existence of some positive aspects such as positive shocks across major economies and the prospects of increasing trade, which would be very beneficial for the region. Regional Agreements are important frameworks to boost intra regional trade among member countries. There are many studies which look at South Asian region and prospects of intra regional trade among its members. For example, Mehta and Kumar (2004) argued that signing of SAFTA agreement was a landmark in the evolution of SAARC since its formation in 1985. SAARC would benefit from regionalism if its cooperation would extend beyond formal trade. Dhungel (2004) noted that actual progress and achievement in implementation of SAARC agendas were considered insignificant. Jhamb (2006) supported Dhungels view and argued that it was primarily due to the tenuous political relations between India and Pakistan and a general environment of mistrust among member countries. However, by using the Gravity Model, Rahman, et al. (2006) showed that elimination of trade barriers and structural rigidities originating from adverse political relationship could lead to substantial increase in intra-SAARC trade. Pitigala (2005) found that the trade structures that evolved among the South Asian countries might not facilitate a rapid increase in intraregional trade

due to weak trading relations among the SAARC countries. This view was supported by a study by Baysan, (2006). However, studies by Baysan et.al,11 (2006), Pitigala 12 (2005) and Srinivasan 13 (2001) draws from both existing literature and own analysis to argue that an economic case for a free trade area in South Asia is relatively weak due to reasons like the small size of the economies (other than India), lack of openness and higher transaction costs of doing formal trade. Baysan, et.al (2006), holds the view that political rather than economic reasons were behind the creation of the SAFTA, a view finds echo in other studies as well. In order to limit the potential adverse effects and maximize the benefits of SAFTA, the countries of the region are advised to: - take steps to minimize the sectoral/product exceptions have rules of origin that are very liberal, simple, transparent, and remain the same for all products - have clear rules against tariffrate quotas and - India and Pakistan move to MFNbased trade.

ANALYSIS:
South Asian Association of Regional Cooperation (SAARC) will be 26 years old in the year 2011. In a quarter of a century of its existence, SAARC came up with some innovative ideas to deal with issues which impeded the process of regional cooperation. Yet, despite holding several summits and ministerial meetings since its inception in December 1985, SAARC has failed to come up to the expectations of the people of South Asia. Composed of 20% of global population and a home of oldest civilizations, South Asia after its emancipation from the colonial tutelage in 1947-48 remained exposed to numerous inter and intrastate conflicts. Issues ranging from enormous poverty to underdevelopment, malnutrition, illiteracy, environmental pollution and shortage of water and energy negatively impacted on the transformation of South Asia from a region plagued with conflicts and other economic/social problems to a developed and secure region. When Bangladeshi President Zia-ur-Rehman mooted the idea of South Asian regional cooperation in 1977-1978, there was a dearth

of intellectual and scholarly thinking in South Asia for following the road of regional cooperation. It took another three years to materialize the idea of the Bangladeshi President when in April 1981 first meeting of foreign secretaries of South Asia was held. With the holding of foreign ministers meeting of South Asia in 1983 the stage was set for launching SAARC in December 1985 when the first summit of South Asian heads of state and government was held in Dhaka. Since then, SAARC has established itself as a full-fledged regional organization but still there are some of the critical issues which impede the process of regional cooperation in South Asia. At a time when SAARC is almost quarter of a century old, it has a long way to go in order to implement its decisions on regional economic cooperation. The fault lines of SAARC no doubt prevent its transformation as a viable regional organization. Some of the fault lines which one can figure out in SAARC are: 1. Lack of Political will among SAARC members to effectively deal with issues which relate to easing restrictions on the free movement of people, goods, services and capital. 2. The conservative nature of SAARC charter which needs to be revised according to the new realities since its inception in 1985. 3. The ineffectiveness of SAARC headquarters and in inability to play a leadership role in the region. 4. Indias failure to dispel insecurity, suspicion and mistrust among its neighbors about New Delhis perceived quest for regional domination. 5. Lack of ownership of SAARC at the official level. 6. The relation of mistrust between the 2 strongest members of SAARC, i.e Pakistan and India. SAARC has spectacularly failed in its main task: promoting regional economic integration., to hold regular summits and ease travel restrictions. According to a World Bank report released last year, South Asia is the least integrated region in the world. Trade between SAARCs members accounted for less than 2% of their combined GDP. In East Asia, the equivalent figure was 20%. While, one can be critical of SAARC performance in quarter of a century of its existence, one should also take into account the fact that like the United Nations and other international and regional organizations like ASEAN and EU, SAARC is a governmental organization which is dependent on the member states to deliver. When the governments are politically fragile and vulnerable to domestic and external pressures, it becomes difficult for SAARC to play a leadership role in South Asia. Since 1985 till today, the South Asian countries under the umbrella SAARC discussed several areas of cooperation and also

made headway in identifying issues which can help the people of this region to live a stable and prosperous life. The membership of SAARC has risen from seven to eight and several external powers now have observer status. But, being a victim of unresolved conflicts and failing to overcome paranoia, suspicions and mistrust, SAARC failed to come up to a particular standard which is required for a successful regional organization. Around twenty-five years after the formation of SAARC it is time to analyze why it failed to deliver and how it can deal with the fault lines which tend to block its progress and development. One important area which needs to be examined while analyzing the strengths and weaknesses of SAARC is its weak structure. Hence, without restructuring SAARC in terms of its structure, it is very difficult to expect some breakthrough as far as the challenge of regional cooperation in South Asia is concerned.

CONCLUSION:
The formation of SAARC was a landmark step taken by the leaders of the region. The main rational behind was to develop a friendly environment through summit diplomacy where all nations could interact peacefully with each other, cultivate sustainable peace and promote mutual economic well being by harnessing available resources in the region through the process of economic integration. Nevertheless, after 20 years' of establishment, neither South Asian nations have been able to push the process of integration into full swing nor the organization itself has become viable that could promote peace and harmony or prevent conflicts in the region. South Asia has emerged as a regional entity in the international political system with the creation of SAARC but it failed to strengthen regional cohesiveness. Regional cooperation in South Asia cannot be said to have evolved into a complete bloc in terms of regionalism and economic integration due mainly to the prevalence of conflict over the desire of peace and stability. Hence right at this moment, SAARC countries have to improve their relationships and attitudes towards each other and they need to take initiatives to eliminate the existing conflicts among them. In order to introduce a common currency in the region, economical homogeneity is the prime factor, which has some deficiencies in the SAARC countries. Any move towards introducing a common currency for SAARC countries in recent time will not be viable unless a good neighborly relationship and economic homogeneity in the region are achieved.

RECOMMENDATIONS:
It is recognized that the performance and the role of the SAARC is very crucial not only for the economic cooperation but also for the other areas of regional cooperation in South Asia. The member countries are quite aware that they cannot achieve anything in isolation or they cannot depend upon the west permanently. It is through regional cooperation they can become viable and stable as independent countries. In the current scenario SAARC is not able to perform its important role towards the happy and green south asia. Likely there are also some positive points the happiness, and to promote the relations to keep peace in the region, i.e India pakistan relations. Keeping in view, i want to present some recommendations for SAARC to be effective in the region:
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SAARC has to concentrate on food security, climate conditioning and diseases and also focus on improving the socioeconomic condition of 1.5 billion people in the region. Climate change has become a core issue for Saarc as the entire region is vulnerable to the impact of environmental degradation. An effective policy should be made on climate, to face against its changes. There is a huge gap between policy level decisions and their implementation. Investment is very important and South Asian countries need to create increased trade opportunities and export potential amongst themselves. There should be focus on health infrastructure. Pro-poor growth should be promoted in the form of rural industrialisation, rural education etc. of short-term or occasional training institutes for the exchange of such expertise should be considered. Trade issues are dependent on visa issues. And visa processes are so cumbersome that it becomes difficult for people to interact with each other. The visa process for south Asians should be taken in the soft hand made policies to promote the connectivity in the region.

To remove tariff and non-tariff barriers within the region to promote the growth and trade in south asia. The bane that affects South Asia is a lack of cooperation. There is therefore a need for a mega project wherein all countries in South Asia can cooperate with each other. It can be either a natural gas energy project or a hydroelectric power project. The role of the media is very important because it creates an impression on the minds of the people about their neighbours, whom they have never visited. The South Asian media thus has to play a significant role and be more responsible. Their should be a powerful regional cooperation among the SAARC members to create strong economic harmonization To increase greater 'connectivity' in the region through expansion of infrastructure facilities for goods and services and fostering communications across border among business, academics, civil society groups, and media. To establish a Forum, comprising experts of SAARC states that will meet at least once a year to reflect and deliberate on issues in different SAARC capitals, and to transmit their inputs in critical areas of cooperation. At last but not the least, Pakistan and india should remove mistrust in their relations. Both countries should forget the past and spread the message of love and peace around towards the better south asia. If this happens it will send a very positive signal about success of SAARC in the region.

REFERENCES:
Anam, M., & Rahman, S. S. (1991). Economic integration in South Asia: An exploratory analysis in trade, investment and finance. Journal of Developing Societies, 7, 139-158. Hassan, M. K. (2001). Is SAARC a viable economic block? Evidence from Gravity model. Journal of Asian Economics, 12, 263-290. Khan, S. M. & Khan Z. S. (2003). Asian Economic Integration: A Perspective on South Asia, Journal of Asian Economics, 13,767-785. Rajapakse, P. & Arunatilake, N. (1997). Would a Reduction in Trade Barriers Promote IntraSAARC Trade? A Sri Lankan Perspective, Journal of Asian Economics, 8(1), 95-115. Saxena, S. C. (2005). Can South Asia adopt a common currency? Journal of Asian Economics, 16, 635-662. Tercan Baysan, et.al (2006) Tercan Baysan, Arvind Panagariya, and Nihal Pitigala (2006) PREFERENTIALTRADING IN SOUTH ASIA, World Bank Policy Research Working Paper 3813, World Bank: Washington DC. Pitigala, Nihal (2005) What Does Regional Trade in South Asia Reveal about Future Trade Integration?:Some Empirical Evidence, World Bank Policy Research Working Paper 3497, World Bank: Washington D C. Srinivasan, T. N (2001). Preferential Trade Agreements with Special Reference to Asia, available at http://www.econ.yale.edu/~srinivas/PrefTradeAgreements.pdf The News, 22 April 2007: http://jang.com.pk/thenews/apr2007weekly/nos-22-04-2007/pol1.htm#3

SN RAGHAVAN (1995), (Regional Economic Cooperation Among SAARC Countries). World Bank reports on regional integraton. Times Of India. Shahid Akhtar, Patricia Arinto, (Digital Review of Asia Pacific 20092010).