INDIA AND SAARC

MINUTE BRIEFING

The South Asian Association for Regional Cooperation (SAARC) was

established at the First SAARC Summit in Dhaka on December 7-8, 1985.
Its members are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and
Sri Lanka.

The objectives of the Association as defined in the Charter are:

To promote the welfare of the peoples 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;

1
 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 organisations with similar

aims and purposes

Decisions at all levels in SAARC are taken on the basis of unanimity.

Article X (2) of the SAARC Charter excludes bilateral and contentious
issues from the ambit of SAARC.

INTRODUCTION
After India adopted the policy of NSR (National Self Reliance) in order to
remove dependence on foreign aid, India took the next step of forming
SAARC along with the 6 neighbouring countries.
This step has helped India develop good and cordial relationship with its
neighbouring countries in all aspects i.e. socially politically and
economically. After SAARC being formed by India along with 6 of its
neighbouring countries, India has been able to develop trade relations with
all the SAARC members.
India had the chairmanship of SAARC during the year 1996-97.India hosted
the 17th session of the SAARC council of ministers at New Delhi in 1996.
Recently the 14th SAARC summit was held in New Delhi

INDIA’S CONTRIBUTION TOWARDS SAARC

India has cooperated actively in SAARC activities and vigorously promoted

trade and other forms of economic, social and technical cooperation within
SAARC.

India also actively supports people-to-people initiatives aimed at fostering

greater mutual understanding and goodwill in the region.

2
India is the only SAARC member that shares land borders with four
members and sea borders with two. No other SAARC country shares a
common border with each other.

In terms of trade, commerce, investments etc. India is a source of potential

investments and technology, and a major market for products from all other
SAARC members.

One of the foremost challenges facing South Asia is the issue of poverty
eradication. At the Twelfth Summit held in Islamabad in January 2004, India
offered to contribute US$ 100 million for Poverty Alleviation projects in
SAARC countries (outside India). India has additionally offered to finance
feasibility projects in SAARC countries in this regard.

India has granted the highest number of tariff concessions to all SAARC
MEMBERS.

EFFECTS ON INDO-PAK RELATIONS

SAARC has failed to resolve disputes between India and Pakistan

(especially the Kashmir Issue). The progress of SAARC was limited for
some years due to the absence of cordial relationship between India and
Pakistan.

SAARC'S inability to play a crucial role in integrating South Asia is often

credited to the political and military rivalry between India and Pakistan.

However during Prime Minister Atal Bihari Vajpayee’s visit to Islamabad

(for the 12th SAARC summit) Pakistan persuaded India to resume talks
about maintenance of peace and the stalled composite dialogue, while India
received assurances that Pakistan would not allow its territory to be a hub for
terrorist activities. The composite dialogue had then started.

At present India’s export to Pakistan are limited. For example in the year
2001-2002 India’s total exports were $44 billion out of which a mere $204
million went to Pakistan. On the other hand, India’s exports to Bangladesh
stood at $ 930 million and exports to Sri Lanka at $662 million.

3
Pakistan has to pay heavy price for importing goods from other countries
except India. India’s exports suffer due to non availability of neighbouring
market.

Along with India and Pakistan, other countries of SAARC are likely to get
many benefits because of improved INDO – PAK relations. In the recent
Indo-Pak dialogue process, there were no winners and losers. The real
winners were the people of South Asia.

SAARC: A FAILURE FOR INDIA (VICE-VERSA)??

SAARC had failed to resolve conflicts between India and Pakistan. There is
discontent still between both the countries.

SAARC has yet to become an effective regional organization, largely

because of mutual distrust between India and its neighbours.

Also India's lukewarm support for SAARC stems from the concern that its
neighbours might coalesce against it to the detriment of Indian interests.

The reluctance of India and other South Asian countries to turn SAARC into
a forum for resolving major regional disputes hampers SAARC’S ability to
deal with many of South Asia's economic and political problems

CO-OPERATION TROUBLES BETWEEN INDIA AND SAARC

MEMBERS
SAARC is structured in a way that often makes regional cooperation
difficult. Thomas Thornton argues that in regional organizations it is
difficult for “countries to establish balanced relations when one has a
significant advantage in power over the other states.” In the case of SAARC,
India is the most powerful country in terms of its economic might, military
power and international influence. Thus, India’s potential as a regional
hegemony gives SAARC a unique dynamic compared to an organization
such as ASEAN. Pakistan was initially reluctant to join SAARC due to fears
of SAARC succumbing to Indian hegemony. Indeed, if India does take a
prominent role in SAARC, it could further fears that India will use SAARC
for hegemonic purposes. While the smaller states in South Asia recognize
that they will need India’s help to facilitate faster economic growth, they are
reluctant to work with India, fearing that such cooperation will admit Indian
dominance in SAARC.

4
Aside from a few overtures to its neighbours, India has done little to allay
the fears of other South Asian states. The core of these fears is likely derived
from the displays of India’s power by New Delhi in the past. Realizing its
considerable advantage in military and economic power, India has
consistently acted in an “arrogant and uncompromising” manner with its
neighbours. Bangladesh is afraid of India exploiting its geographical
position to redirect water flows vital to Bangladeshi agricultural production.
Nepal and Bhutan are still worried about India’s control over their world
trade and transit links as their geographical position will always make them
dependent on India. These disputes between India and its neighbuors have
directly affected SAARC.

Namely, disputes between South Asian states have undermined SAARC

efforts to promote regional trade. These disagreements make consensus
building and cooperation among SAARC states complicated. Attempting to
promote regional cooperation while doing little to resolve regional conflicts
makes SAARC’S mission looks nearly impossible. Moreover, SAARC has
no institutional mechanisms or punishments capable of preventing or fully
resolving a dispute. Two examples illustrate how conflicts in South Asia
have proven detrimental to SAARC.

The first involves Indian intervention in Sri Lanka from 1986-1990. The
Indian military intervention to put down an insurgency by The Liberation
Tigers of Tamil E Elam made Indo-Sri Lankan relations tense during these
four years. Subsequently, the apprehension between India and Sri Lanka was
considered a primary reason behind Sri Lanka’s “lukewarm” support for
SAARC into economic and social spheres of its member states until
relations improved with India.

A second, more prominent example of a conflict derailing SAARC progress

is the Indo-Pakistani conflict. Pakistan has demanded a resolution to its
dispute with India over the Kashmir Valley before discussing trade relations
with New Delhi. Pakistan has enforced this policy by violating WTO
regulation for failing to confer Most Favored Nation (MFN) status on India.

5
India has recently attempted to improve its relationship with the rest of
South Asia. Under the Gujral Doctrine established by former Indian Prime
Minister I.K Gujral, India signed a 30-year water sharing treaty with
Bangladesh and a trade and transit treaty with Nepal. India also joined a sub
regional group within SAARC comprising of Bangladesh, Bhutan, Nepal
and India. Despite political impediments to trade, value of goods smuggled
from India to Pakistan via a third party generally totals 250-500 million per
year. If trade between the states was opened, Pakistan would receive cheaper
imports due to lower transport costs and the absence of payments to a
middleman. This implies that there is potential for lucrative trade between
India and Pakistan. Moreover, if these two states, arguably the largest
powers in SAARC, pushed for economic cooperation, it is likely that other
states will follow their lead. Therefore, it is not surprising that the Indo-
Pakistani dispute over Kashmir is considered a primary cause of SAARC’S
impotence.

Due to these conflicts, the desire for South Asian states to trade with one
another has been limited. By squelching trade between South Asian states,
the disagreements between India and its neighbors have limited the
effectiveness of SAARC trading initiatives. The South Asian Preferential
Trading Agreement (SAPTA) signed in December 1995 had SAARC
countries reduce tariffs in certain economic areas to promote intra regional
trade. The proposal was initially met with enthusiasm as India agreed to
reduce tariffs in 106 of the 226 fields recommended by SAARC and
Pakistan agreed to concessions in 35 fields. This statistic emphasizes a trend
in SAARC— India seems gung ho about intra regional cooperation. In 1995,
when SAPTA was being implemented, only 3 percent of all South Asian
trade was conducted in the region.

Six years later, the improvements seen in regional trade have been marginal.
India’s trade within South Asia accounts for only 4 percent of its total global
trade and Pakistan’s trade in the region accounts for merely 3 percent of its
overall trade.

Compared to other countries with similar proximities and income levels,

intra regional trade among SAARC states is relatively small. Much of the
trade that is conducted in South Asia is also considered symbolic and
generally does not involve goods vital to the economies of the South Asian
states.

6
Moreover, some states still have high tariff and non-tariff barriers to trade,
indicating that the spirit of free trade does not seem alive in SAARC.
However, SAARC is trying to remedy this problem.
SAARC hopes that the establishment of a South Asian Free Trade Area
(SAFTA) by January 1, 2006 will stimulate trade in the region. However, the
agreement to establish this free trade zone will take 10 years of gradual tariff
reduction.

For a proposal that has already been delayed, it will take some genuine
political cooperation for the tariff reduction process to run smoothly.
Judging from the experience of ASEAN, an organization with a better track
record in producing economic coordination among member states than
SAARC, creating a free trade zone could become difficult. The ASEAN free
trade agreement (AFTA) has been criticized for not producing substantial
economic interdependence among the region. This lack of success results
from distrust and protectionism among its member states. If SAFTA is
implemented, its success will depend on the resolution of conflicts between
South Asian states—something which seems unlikely in the future.

CONCLUSION
India needs to play a major role in SAARC
India being an important member of the group should initiate steps to ensure
that the nations go beyond the rhetoric and make the Summit meaningful in
the future. Creation of Export Promotion Zones and Special Economic
Zones in each SAARC member country as pointed out by industry bodies
will enhance investments between them and will thus encourage intra-
SAARC investments
The Indian government has to understand that the export-import community
needs easier movement of goods, services, and people within the member
nations.
India should also maintain peace and take proper and appropriate steps to
resolve disputes and solve issues amongst the SAARC members especially
with Pakistan.
According to Former Prime Minister Atal Bihari Vajpayee, “Countries in the
SAARC region have to make a bold transition from mistrust to trust, from
discord to concord and from tension to peace”.

7
8