By Ram Kumar Jha and Saurabh Kumar
Poor connectivity and non-tariff barriers to trade, besides geo-political tensions between member countries such as India and Pakistan are major reasons for the South Asian Association for Regional Cooperation (SAARC) not achieving its potential in the three decades of its existence.
The 18th SAARC summit with the theme ‘Deeper Integration for Peace and Prosperity’ held in Kathmandu, Nepal from Nov 26-27, 2014 attended by Indian Prime Minister Narendra Modi, Pakistani Prime Minister Nawaz Sharif, Sri Lankan President Mahinda Rajapaksa, Afghanistan’s President Mohammad Ashraf Ghani, Bangladesh Prime Minister Sheikh Hasina, Maldivian President Abdulla Yameen and Bhutanese Prime Minister Tshering Tobgay did not produce the desired outcomes.
This article argues that in the absence of significant progress within the SAARC regional group, India is looking at some other regional groupings and forums. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) can be seen as one such forum which has potential to become a complementary regional cooperation grouping to SAARC.
Despite so many agreed areas of cooperation, innumerable institutional mechanisms and a permanent secretariat, SAARC has not taken off as a meaningful framework for regional cooperation. SAARC suffers from some fundamental structural flaws. SAARC was not born out of any genuine desire for regional cooperation: It was originally intended as a mechanism for India’s smaller neighbours to gang up against India. Moreover, all SAARC countries do not share a common security perspective, which means that the requisite trust and mutual goodwill for meaningful regional cooperation are missing.
The Kathmandu summit was meant to witness a framework for cooperation in road, rail connectivity and energy. Disappointment came from Pakistan as initially it did not agree to sign agreements on rail, motor vehicles (i.e. transportation agreements) and cited that “internal processes” have not been completed, although in the end it also agreed upon it, while on the last day the power grid connectivity agreement was signed. Meanwhile, India and Nepal signed two agreements bilaterally for development of infrastructure and promotion of tourism. India’s extension of Line of Credit of $1 billion to Nepal, signing of Motor Vehicle Agreement and start of the Kathmandu-Delhi bus service with the name ‘Pashupatinath Express’ will improve India-Nepal relation in long run.
Agreement for the ‘Regulation of Passenger and Cargo Vehicular Traffic amongst SAARC Member States’, ‘SAARC Regional Agreement on Railways’ and ‘SAARC Framework Agreement for Energy Cooperation’ have also been approved by all member countries, excluding Pakistan.
After signing of the Motor Vehicle Agreement, cargo, passenger and personal vehicles can move across the region upon fulfilling the specified criteria and in accordance with the customs laws of the concerned member countries. The agreement on railways will enable transportation of passengers and goods through railways across the region on certain terms and conditions. The agreement on electricity aims to create a regional energy market aimed at enhancing cross-border electricity trade among the South Asian countries.
But at the same time, the failure to complete the process of signing of proposed agreements on ‘Regulation of Passenger and Cargo Vehicular Traffic amongst SAARC Member States’ and ‘SAARC Regional Agreement on Railways’ can be seen as an indication of the group’s limitations.
During the 18th SAARC summit Indian Prime Minister Narendra Modi said that, “The bonds will grow through SAARC or outside it, among us all or some of us. We can all choose our paths to our destinations. But, when we join our hands and walk in step, the path becomes easier, the journey quicker and the destination closer.” The approach behind this statement can be recognized as: if Pakistan does not fall in step, India will strengthen relations with the rest of SAARC countries by improving connectivity with others.
In this context, complementary to SAARC can be BIMSTEC, which was initiated in 1997 at the instance of Thailand and took up its new name in 2004. This group currently includes seven countries: Bangladesh, Bhutan, India, Nepal, Myanmar, Sri Lanka and Thailand.
Despite SAARC’s existence since the last 30 years, intra-regional trade stands at only around five percent, while on the other hand intra-regional trade in BIMSTEC has reached around six percent within the last decade. Thus, it shows greater chances of trade potentiality within BIMSTEC countries.
Myanmar’s intra-BIMSTEC trade is around 36.14 percent of its total trade. The share for Nepal and Sri Lanka is around 59.13 percent and 18.42 percent respectively. In the case of Bangladesh, the intra-BIMSTEC trade share is 11.55 percent while for India and Thailand it is around three percent. A wider look at the bilateral trade share shows that India and Thailand can became destinations of trade for other member countries.
The formation of a free trade agreement (FTA) between BIMSTEC countries will also enhance intra-regional trade potential. The proposed BIMSTEC FTA has the potential of $43-$59 billion annual trade creation, when the full FTA comes into effect from 2017. Intra-regional trade in this region could rise by as much as 60 percent, and this group’s trade with the world could grow by 30 percent if trade facilitation systems could be raised to international standards.
BIMSTEC provides India a revised regional platform to address a range of concerns, as well as the opportunity to counter the underdevelopment of border regions, particularly in the country’s northeast. Indian states of Assam, Arunachal Pradesh, Meghalaya, Mizoram, Manipur, Nagaland, Tripura and Sikkim share international boundaries with Myanmar, Bangladesh and Bhutan, which are all members of BIMSTEC. Therefore, BIMSTEC has a better balance of power than SAARC, since the dependence of India’s northeast region on Bangladesh and Myanmar considerably reduces India’s superiority in the grouping. BIMSTEC could become a practical and desirable bridge between South Asia, as a whole, and Association of Southeast Asian Nations (ASEAN).
BIMSTEC can also assist the member countries in strengthening their external competitiveness. The cooperation can take the form of joint marketing and coordination in third country trading, regional cooperation for dealing with non-tariff barriers and coordination for future negotiations in World Trade Organization.
(Ram Kumar Jha and Saurabh Kumar are working as Policy Analysts, CUTS International and can be contacted at firstname.lastname@example.org & email@example.com)