South Asian Economic Union: a mirage? (I)


Mohammad Jamil

Addressing a press conference at the conclusion of the 8th SAARC Finance Ministers Meeting, Ishaq Dar said, “Several mechanisms had been established to deepen the economic integration of the SAARC region. We are now moving from the South Asian Free Trade Area (SAFTA) to the South Asian Economic Union.”
However despite vows and claims, trade among the seven members, now eight, accounts for less than six percent of their total trade.
There cannot be two opinions about the need to augment regional trade for the benefit of all countries of the region, but the Kashmir dispute between Pakistan and India in particular, and trust deficit among SAARC members in general have stymied the progress in this regard. Since the last SAARC summit in Kathmandu in 2015, the debate is raging as to why SAARC has remained a non-achiever, rather a non-starter.
Indian accuses Pakistan of stalling the progress, whereas Pakistan blames India for its intransigence, and holds it responsible for the present state of affairs and poor performance of this regional organisation.
Of course, to convert SAARC into the South Asian Economic Union, its members should resolve all disputes, as the formation of the European Union (EU) had become possible after the member countries of the EU had resolved their territorial disputes. As a matter of fact, all member nations of SAARC have had problems with India at one time or another.
To be continued
History of Indian hegemony in South Asia is known to all and sundry, as India had absorbed Sikkim in 1960s, had flexed muscles and fought with China in 1962, Bhutan was made nominally independent, and Nepal has complaints about Indian intervention. Nepal’s adoption of a new federal, democratic and secular constitution had angered India, as if Nepal is not a sovereign country.
Sri Lanka was once wary of Indian intervention through Tamil terror; even the Maldives was not spared. The Teesta River water-sharing issue is a thorny one between India and Bangladesh. Of course, sharing of water of the River Ganges and row over land boundary protocol were other irritants. The Bharatiya Janata Party, opposed to the implementation of the 1974 border agreement, has more than once expressed its strong views on the issue, and has reportedly decried the land swap deal. Pakistan has always suspected that India would use commerce as a way to undermine Pakistan’s fidelity to Kashmir, which is why Pakistan wants India to resolve the core issue before the Most Favoured Nation status accorded to India could be implemented. The problem is that India’s ambition for big power status clouds the prospects of unity amongst the South Asian nations. India, therefore, has to give practical demonstration that it would deal with other nations on the basis of equal sovereignty.
The future of South Asia, inhabited by more than 1.7 billion people, and marred with threats of war depends on the leadership of the countries of the region. So far, SAARC has been a little more than a talk-shop since its inception in 1985, where speeches are delivered, and leaders express their determination to convert the region into a South Asian union. But these ideas have not gone beyond noble sentiments, as after years of free trade regime, the trade between SAARC countries increased from 2.7 percent in 1990s to four percent of the global trade, and since 2011, it is around six percent. It, however, goes without saying that India, being the industrially developed country in SAARC stands to gain the most if it normalises relations with its neighbours by resolving all outstanding issues.
The fact remains that in South Asia 21 percent of the world population is living on only 3.8 percent of total land area of the world. And South Asia is home to more than half a billion poor people or 40 percent of the world poor. There is indeed a common desire of the countries to open a new chapter of Asian prosperity, where teeming millions living below the poverty line especially in South Asia could benefit from the proposed economic partnership. First of all, enhanced trade and cooperation could improve the living standards of their people. Secondly, by trading with each other they can save a lot of foreign exchange because imports from the US and European countries are expensive. Thirdly, savings in cost of freight can be enormous, and all member countries stand to gain by enhancing trade between them.
But delay in implementation of SAFTA is one of the reasons for poor performance of SAARC. Some members had expressed reservations over the list of sensitive products, rules of origin and compensation mechanism for the least developed countries. A phased tariff liberalisation programme from the date of SAFTA’s coming into force was envisaged, but could not be implemented. Members of SAARC often talk of emulating the EU, not realising that formation of the EU was due to the efforts and the joint vision of the then French president, Charles De Gaulle and German chancellor, Conrad Edenauer. They were instrumental in uniting the European nations that had fought decades-long wars plus a hundred-year war in addition to two World Wars.
Asian leaders, therefore, should rise to the occasion, and give practical demonstration of their will to resolve all political disputes.
The idea of a South Asian Economic Union or Asian Union sounds premature; however, in the interest of peace and prosperity in the region, Pakistan and India should resolve all disputes to move forward. On April 6, 2005, representatives of 26 Asian countries participating in the 4th Asia Cooperation Dialogue Ministerial meeting in Islamabad on “Economic Cooperation in Asia” had stressed the need for introducing a common currency, constituting a monetary fund and liberalising Asian bonds market and trade. In the 8th meeting of SAARC finance ministers held on Friday, the proposal of common currency has been rejected. In other continents — Africa, Europe and America — such associations and institutions have been formed for their benefit, but Asia and especially South Asia is lagging behind. Pakistan and India need visionary leadership to lay the foundation for a EU-like economic union.