SAARC: South Asian Association for Regional Cooperation Making Regional Trade Agreements Work in South Asia

Contents

Introduction and Background Information Objectives How far has SAARC Progressed? Trade and economic cooperation Why SAARC is a disappointment? How to Make SAARC Work Conclusions

Introduction and Background Information

The South Asian Association for Regional Cooperation (SAARC) was established in December 8, 1985

Members
Evolution Meetings

An economic and political organization of eight countries - Bangladesh, Bhutan, Maldives, Nepal, Pakistan, India and Sri Lanka, Afghanistan

Members

Observers

Objectives
SAARCs mission is to accelerate the process of economic and social development of member states
To contribute to mutual trust, understanding and appreciation of one anothers problems.

To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields

Objectives
To strengthen cooperation with other developing Countries. To strengthen cooperation among themselves in International forums on matters of common interests
To cooperate with international and regional Organizations with similar aims and purposes

How Far Has SAARC Progressed?

Summits have taken place focusing on expanding and strengthening the regional cooperation

Several ministerial level meetings have taken place to give due emphasis in various fields

How Far Has SAARC Progressed?

Creation of food bank holding reserves 241,000 tons of rice and wheat for security reasons Antiterrorism police force set up in Pakistan South Asian Free Trade Agreement (SAFTA)

Trade and Economic Co-operation

In 1991, a Regional Study on Trade, Manufactures and Services (TMS) was completed.

The Council of Ministers at its Ninth Session in July 1991 decided to set up a high-level Committee on Economic Cooperation (CEC)

Trade and Economic Co-operation

The Council of Ministers at its Fifteenth Session agreed that the full and timely realization of the benefits of regional economic cooperation required

a) the implementation of trade control barriers within the specific timeframes and

(b) eventual progression to the creation of a freetrade area in the region.

Trade and Economic Co-operation

The following initiatives have also been taken towards promoting trade cooperation within the region:
i) Cooperation in the field of Handicrafts and Cottage Industries ii) Study on Transport Infrastructure and Transit Facilities

Why SAARC Has Been a Disappointment

SAARC is ineffective due to conflicts between its members and a lack of progress made compared to other regional organizations such as ASEAN

Pakistans political instability

Nuclear arms race and Kashmir conflict between India and Pakistan Main challenge facing SAARC today how to make it effective and action oriented

Why SAARC Has Been a Disappointment

Social indicators - Poverty, education, natural disasters, Indias workforce size Political factors - India and Pakistan, systemic differences and military conflict Economic factors - Ineffective trade, GDP imbalance, trade imbalance

Social Indicators: Education

Low education level in some countries is leading to a lack of development Gaps between enrolment and completion of education
Literacy rate, adult total (% of population) 100.00 80.00 60.00 40.00 20.00 0.00
Ne pa l In dia ve s de sh Af gh an is t an Bh ut an Sr iL an ka Pa kis ta n ald i

Ba ng la

Social Indicators: Indias Workforce

Labour force of India is much larger than other SAARC members, therefore trade agreements would be in favour of India
Labour force, total 500,000,000 450,000,000 400,000,000 350,000,000 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000 0
In di a M al div es ta n Bh ut an La nk a Sr i Ne pa l sh Ba ng lad e Pa k is Af gh an is ta n

Political Factors: India and Pakistan

India and Pakistans relationship is tense - differences in foreign policies and different political systems - Indias foreign policy is focused on self-reliance - Pakistans foreign policy is outward oriented - Kashmir conflict - nuclear arms race

Political Factors: Systemic Differences and Military Conflict

Pakistans political instability - Benazir Bhutto and Musharraf Different political systems - Democracy, military dictatorship, Buddhist monarchy, transitional democracy Political tensions due to harbouring terrorists Indias disputes with other SAARC members Nepal and Maoist rebels Tamil Tigers in Sri Lanka

Economic Issues: GDP Imbalance

India is by far the largest economy in SAARC, which skews the regional relationships in its favour Despite this, SAARCs total GDP comprises less than 1/20th of the GDP (thousands US$) worlds GDP 1000000000
900000000 800000000 700000000 600000000 500000000 400000000 300000000 200000000 100000000 0 2001 2002 2003 2004 2005 2006 India Pakistan Nepal Maldives Bhutan Bangladesh Sri Lanka Afghanistan

Economic Issues: Trade Imbalance

Indias export share dominates over other SAARC members Indias goods are more diversified

Economic Issues: Ineffective Trade

Trade between Pakistan and India is currently routed through Dubai SAFTA will allow formal trading relationship between Pakistan and India without third party involvement Landlocked regions lack of resources and lack of access to markets Member states producing substitute goods, reducing impetus to trade amongst each other

How to Make SAARC Work

Use SAARC as a social tool to solve regional disputes before tackling economic problems Establish political stability first, then develop common economic policies and regional standards Find ways to offset Indias large size and its influence on SAARC More action, less talk

How to Make SAARC Work

If SAARC cooperates, FDI will be increased, reducing poverty and hardship. Improve infrastructure and increase expenditures on infrastructure,especially in remote areas like Nepal and Bhutan Natural disaster aid efforts can provide opportunities for regional cooperation

Country Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka TOTAL

# Products 572 266 2402 390 425 685 211` 4951

Depth of concessions 10% -15% 10-20% 10-100% 5-15% 10-15% 10-30% 10-75%