Greater Economic Interaction can keep SAARC afloat
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Issue Courtesy: South Asia Monitor | Date : 17 Jun , 2016

There is now a distinct possibility that in the 19th summit of the South Asian Association for Regional Cooperation (SAARC) to be held in Islamabad and Murree in November this year, Pakistan may press for the inclusion of China as a full member of the of the organization. It may be mentioned here that in the 18th summit of the SAARC held in Kathmandu in 2014, China, enjoying only an observer status now, had made an all out effort for full membership which was thwarted by India at the last minute. 

But in Kathmandu, the question of Chinese membership had brought to fore the wide chasm that has gripped the SAARC now with countries like Pakistan, Sri Lanka and Maldives supporting China’s inclusion as a full member and thus virtually isolating India within the organization. That India could save the day ultimately was entirely due to its size and the weight it commands within the organization.

Ironically, this has become a bane of the SAARC now and an air of mistrust towards New Delhi arising out of ‘Indian big brotherly attitude’ reigns, rightly or wrongly, supreme among most of the members while China has been successful in maintaining good relations with the same countries. It is certain that attitudes of Bangladesh and Nepal will be vital if the issue of Chinese membership comes up at the Pakistan summit. Both the countries may be described as leaning significantly towards China’s orbit of influence.

Possessing 70 percent of the SAARC area and population, India cannot shirk the responsibility behind SAARC’s present moribund condition. The inexplicable provision in its charter that the organization cannot deal with any bilateral or ‘contentious’ issue, has reduced SAARC to the position of a helpless spectator of various security related explosive situations particularly the continuous stand-off between India and Pakistan. As a corollary of it, SAARC played almost no role while Sri Lanka was subjected to a long standing ethnic war. With Afghanistan now bleeding continuously, SAARC’s role has been that of an onlooker.

As the dynamics of international relations is fast moving towards a geo-economic character, intra-regional trade and economic activity among the SAARC member countries must increase if the organization has to stay afloat. The region has 2 percent of world trade and 1.7 percent of the world’s foreign direct investment (FDI). Intra regional trade is only 6 percent of global trade and intra regional FDI is only 3 percent of total FDI committed in the SAARC area. Just contrast it with the economic activity in the Association for South East Asian Nations (ASEAN) countries. There intra regional trade forms 25 percent of the ASEAN nations’ total trade volume and intra regional FDI is 18 percent of net ASEAN FDI. The eight SAARC nations may have 3 percent of world area but as they are inhabited by 21 percent of the world population, there is always scope for increased economic activity.

In such a situation China, with its vast hard currency reserve, holds a tantalizing prospect for the smaller countries under the SAARC umbrella. Pakistan will no doubt showcase the Chinese investment in the USD 46 billion worth China Pakistan Economic Corridor(CPEC) which is nearly 20 percent of Pakistan’s gross domestic product(GDP). In contrast the 37th session of the SAARC council of ministers held in Pokhara of Nepal in March last failed to show any concrete result except a few uncertain nods for setting up some new organizations and some equally vague expressions of interests for tackling terrorism and poverty.

Blaming India for all of SAARC’s woes will serve no purpose although New Delhi, by its policy of quotas, tariffs and other kinds of barriers, has contributed to it. Unfortunately the South Asian Free Trade Area (SAFTA), a flagship arm of the SAARC started in 2004 for promoting intra regional trade, is languishing. Intra regional trade in South Asia is still hovering around 5 percent of total trade volume of regional members while the same figures for the European Union and the ASEAN are 60 percent and 29 percent respectively.

Economic disparity in trade, manufacturing sector and services, restrictive trade policies, presence of foreign capital, competitive economies and little monetary cooperation etc. have all combined to stymie the potentiality of the SAARC. Since the organization has a very weak secretariat it has not been possible for it to keep a tab on the member countries clashing with one another for control of markets.  For example Bangladesh, India and Nepal are vying with one another for dominating the jute trade in UK, the European Economic Community (EEC) and the US. Similarly India, Sri Lanka and Bangladesh are mutually competing over control of tea trade with the EEC, UK, Japan and Australia.

For reviving the sagging morale of the SAARC, the need of the hour is three fold- an amendment in its charter for dealing with bilateral security related issues, formation of a Regional Trade Organization (RTO) on the lines of World Trade Organization(WTO) and the successful implementation of the South Asian Free Trade Area concept.


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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Amitava Mukherjee

is a senior journalist and commentator writing on issues related to Bangladesh, Myanmar and the Indian North-East. He can be reached at:

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