Submitted to: Sir Samee Ullah Khan Lashari

Submitted by:

Aleena Javaid

CIIT/FA08-BBA 10 B-011/LHR

Submission Date:



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Introduction & Evolution Principles Objectives History Financial arrangements in SAARC Trade and economic cooperation Regional conventions agreements Why SAARC a failure? conclusion

SAARC (South Asian Association for Regional Cooperation) was established on December 8, 1985 by seven countries of Asia named as Pakistan, Bhutan, Bangladesh, Maldives, India, and Sri Lanka. This is an economic organization of eight countries of Southern Asia. SAARC is an evident of the determination of the people of South Asia to work together towards finding solutions to their common problems in a spirit of friendship, trust and understanding and to create and order based on mutual respect, equity and shred benefits. The main purpose of this association is to increase the progress of economic and social development in member states, through joint action in the agreed areas of cooperation. In April 3, 2007 Afghanistan became the 8th member. The people of its member countries are around 1.5 billion. In terms of population its sphere of influence.1 (is an area or region over which a state or organization has significant cultural, economic, military or political influence) is largest of any regional organization. The headquarters of SAAC are Katmandu and Nepal. Chairman and secretary General are Mahinda Rajapaksa and Sheel Kant Sharma respectively. The GDP in 2005 was estimated as US $4074031 million and per capita US $ 2777.2

SAARC was adopted. 1. Cooperation within the framework of the ASSOCIATION shall be based on respect for the principles of sovereign equality, territorial integrity, political independence, non-interference in the internal affairs of other States and mutual benefit. 2 . Such cooperation shall not be a substitute for bilateral and multilateral cooperation but shall complement them. 3. Such cooperation shall not be inconsistent with bilateral and multilateral obligations.

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Charter of SAARC , article 2


The objectives of the association in charter are:4
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• • • • • •

To promote the welfare of the people of South Asia and to improve their quality of life; To accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potential; To promote and strengthen collective self-reliance among the countries of South Asia; To contribute to mutual trust, understanding and appreciation of one another's problems; To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; To strengthen cooperation with other developing countries; To strengthen cooperation among themselves in international forums on matters of common interest; and To cooperate with international and regional organizations with similar aims and purposes.

In 1970 Ziaur Rehman president of Bangladesh presented an idea of creation of a trade bloc and the member of this bloc would be the countries of South Asia. This idea was again presented in assembly in May 1980. In April 1981, the foreign secretaries of the member countries met for the first time in Colombo. The aim of this association is to promote the welfare of the people of the member countries through increased economic, social and cultural development. In 1983 in New Delhi, the first summit meeting was held and the key agreement of saarc was Integrated Program of Action (IPA). The (IPA) agreed to cooperate on twelve areas: agriculture, rural development, meteorology, health, population activities, transport, postal services, scientific and technological cooperation, sports, arts and culture. At the 10th summit meeting held in 1998 in Colombo, Sri Lanka, the leaders of the member countries agreed to establish the SAARC Information Centre (SIC) which is located in Nepal as an information hub for SAARC countries. In January 2006 an agreement was signed (SAFTA) South Asia Free Trade Area which came into force replacing the (SAPTA) South Asia Preferential Trade Agreement enhancing integration process? Regional collaboration in finance, trade and investment was being pursued in order to establish (SAEU) South Asian Economic Union.5

4 5

Charter of SAARC , article 1


The member states contribute the balance according to an agreed formula, while the host country pays a minimum balance. For example, in 1993, when the building of secretariat was under construction the host country paid the 40% of the balance and the rest of the balance was shared according to the agreed formula.

SAARC has taken important steps to expand in the core economic areas among the member countries. The council of ministers endorsed the study and decided to set up high level committee on (CEC) committee on economics cooperation on the ninth session in July 1991 in Malaysia. At the summit meeting in Colombo in December 1991, the head of states of the member countries approved the establishment of (IGG) to seek agreements on an institutional framework under which trade liberation among its members. In the four meetings of IGG , in the negotiations among the member states exchanged the concessions to be offered/sought. The council of ministers at its 15th meeting session agreed that the full and timely realization of the benefits of regional economic cooperation required.

(a) the implementation of other related measures such as the removal of Para-tariff, non-tariff and other trade control barriers within the specific timeframes and (b) eventual progression to the creation of a free-trade area in the region. The head of state or govt. at the 8th summit meeting in Delhi 1995 aid that the first round of trade under SAPTA has been completed. CEC at its 6th summit meeting in 1995 in Delhi recommended that with the operationalisation of SAARC (SAPTA) ,it is now desirable to work toward removal of para-tarriff and non-tariff barriers widening and deepening the tariff cuts and expanding the list of products to be included for intra-SAARC preferential trade under SAPTA. It recommended that to push the SAPTA process forward ,the IGG on trade Liberalization be call together to conduct the 2nd round of trade negotiations under SAPTA and proposed that the 1st meeting of the 2nd round can take place in 1996 .



The following fields have also been taken toward promoting trade cooperation within the region: • Cooperation in the field of Handicrafts and Cottage Industries • Study on Transport Infrastructure and Transit Facilities

 SAARC Chamber of Commerce and Industry (SCCI)

(SCCI) was recognized in December 1992 by SAARC. The head quarters are established at Karachi and the national units in all seven countries. First president of SCCI was MR. S.M Inam. SCCI will act as a dynamic instrument of promoting regional cooperation in the area of trade and economic relations. The SAARC Chamber has been instrumental in disseminating the information about the content, scope, and potential of the Framework Agreement on SAARC (SAPTA) among the business community in the region. It has organized its aegis, various seminars on SAPTA in the member countries for this purpose. In December 1994 a regional seminar on SAPTA was organized in Katmandu by Federation of Nepalese Chambers of Commerce and Industry in cooperation with the SAARC Chamber of Commerce and Industry and Friedrich-Naumann-Stiftung. The delegations of SCCI, headed by their president and comprising representatives of the national Federations of Chambers of Commerce and Industry of SAARC Member States, they have visited Germany and Japan for expanding the exports from the SAARC region to the EU and Japan. To expand the activities of the SCCI in the field of promoting trade both within and outside the region of SAARC, has decide to its recognition to SCCI for a period of 5 years. In October 1995 Mr. Salman F. Rahman was elected the president of SCCI.


1. Agreement on Establishing the SAARC Food Security Reserve (SFSR)

In 1987 Katmandu, during the 3rd summit meeting of SAARC, an agreement was signed on establishing the SAARC food security reserve. An agreement came into force on 12 August 1988, provided for a reserve of food grains for the emergency use. The reserve’s size is 241580 tones. The member countries of the food reserve board meet once a year. The main function of this board is to take review of the assement of the situation of food like production, consumption, trade, prices, quality and stocks of food grains.

2. SAFTA (South Asian free trade Agreement):

On January 6 2004, the SAARC member countries signed the agreement on SAFTA , their aim was to create a free trade zone about 1.5 billion people.

The SAFTA requires the three developing countries in South Asia (India, Pakistan and Sri Lanka) to bring their duties to zero by 2012 in a series of annual cuts. The LCDs of South Asia consisting of Nepal, Bhutan, Bangladesh and the Maldives have an additional three years to reduce tariffs to zero. It's need for the SAARC to make the SAFTA more effective considering the fact that inter-trade among SAARC countries now accounts for only about 5% of the members' total trade, while the figure for the EU is 55% and the NAFTA (North America Free Trade Area) is 61 %. 3. Agreement on SAARC Preferential Trading Arrangement (SAPTA): On 11 April 1993 during the seventh summit meeting of SAARC the agreement on SAPTA was signed by the member states.

During the 6th summit meeting the initiative was taken to establish the SAPTA in December 1991. This agreement provides step by step liberalization of intra-regional trade... It considers the periodic rounds of trade negotiations for exchange of trade concessions on tariff, Para-tariff and non-tariff measures. In SAARC region the SAPTA provide the special and favorable treatment to LDCs. Provisions for safeguard actions and BOP are also incorporated in agreement to protect the interest of the member states during critical economic circumstances. An IGG on Trade Liberalization completed the 1st round of trade negotiations at its 6th summit Meeting held at the SAARC Secretariat, Katmandu on 20-21 April 1995. It finalized the Consolidated National Schedules of Concessions which were approved by the 5th Session of the Council of Ministers held on 30 April - 1 May 1995 in New Delhi. The SAPTA Agreement has since been by Member States and will enter into force on 7th December 1995. The Committee of Participants has since been established and will meet in the third quarter of 1996 to review the progress in the implementation of the SAPTA Agreement.

The future of SAARC seems to have been vanished. The reason is that the culture of the member countries is not same, the people to people contact is very limited and major reason is India’s attitude towards the member countries. The reason is that the relations between the member countries is not good, the don’t cooperate with each other and the main reason is India.

REFRENCE: BY MR. Asim Naeem ‘s column in Pakistan Time

Why SAARC has been a failure?
1). Clash of civilizations:
Prof. Samuel Huntington has mentioned in his book “the clash of civilizations” that SAARC has been a failure because according to him the countries that belong to associations like EU etc they belong to same culture but SAARC belongs to those countries whose cultures are different. India and Pakistan are foes of each other, they fight on pity things, and then how can these two countries help each other in one association……. The one country does not have feeling of belonging with the other area or state.

2). People to people contact:
The contact of the people with the association is zero and as well as with the people of the member countries .they don’t know when was the association made and that was the purpose then how can they join together to help their own state solve their problems……

3). Pathetic condition of the south Asia:
260 million inhabitants of the south Asia lack basic facilities in south Asia and it the most deprived region too. 337 million people lack safe drinking water: 830 million are without rudimentary sanitation and 400 million go hungry every day. SAARC is the most militarized place in world; its two countries Pakistan and India are spending $ 30 billion on their defense expense. Afghanistan, it’s newly member is facing war from last 30 years. In view of these all major problems how such association cans can successfully work.

4). Trade:
All the south Asian countries look up to India to share it s huge markets because of its size and location, where 80% of the of the intra-regional trade in south Asia is to or from India. India blames the failure of SAFTA on Pakistan but its not true at all because SAFTA requires India, Pakistan and Sri Lanka to bring their duties down to 20% in the two year period ending in 2007. The 20% duty in the final phase ending in 2012 will be reduced to zero. During the fiscal period of 2006-2007, the exports of India were in billion dollars but their imports were no more than $350 million. This shows that that how one country wants to put the others duty to 0.

5). Different Political system:
The different kind of politics in the member states is also the reason of the failure of SAARC. In south Asia their hadn’t been a strong democratic region. Like in India there is democracy, in Pakistan there is transitional democracy, kingship in Nepal and presidential system in Sri Lanka. The most countries have remained unstable in the past and the future. The dispute between the two countries India and Pakistan over Kashmir issue has never let these two giant countries of the south Asia to go along well and set aside their differences on the SAARC forum. A part from this the India has dome disputes with its rest of the member countries like Pakistan , Bangladesh , Nepal , Bhutan , and th9is thing also hasn’t helped SAARC cause.

SAARC is the weakest regional organization of the world its population is 1.5 billion, its problems are numerous and they demand urgent solution. The bigger countries should look after the LDCs. the goals should be made realistic, so that they can easily be achieved.

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