Thursday, November 27, 2014

SAARC, its future and India / C. Raja Mohan

For all its trappings of a multilateral organisation, the South Asian Association for Regional Cooperation, whose leaders are gathering in Kathmandu this week, is only an aggregation of India’s bilateral relations with its neighbours. This is the reason why the world is focusing on what Prime Minister Narendra Modi has to offer during the first Saarc summit that he is attending.
The PM had raised expectations that India would take the leadership of the region by his surprise invitation to all the Saarc leaders to attend his swearing-in ceremony in May. His visits to Bhutan and Nepal have reinforced those hopes. Modi, however, has a problem. He has inherited a dysfunctional Saarc, whose failures are rooted in geography and history.
As the largest country located at the heart of the subcontinent, India has borders with all its neighbours. Only two other members, Pakistan and Afghanistan, have a border with each other. It is no big surprise, then, that most of the regional trade is actually bilateral trade between India and its neighbours. So are the problems that come from a common border.
That takes us to the history of these frontiers. The partition of the subcontinent created new borders and territorial disputes within the subcontinent. Nearly seven decades later, India does not have settled borders with either Pakistan or Bangladesh. In the northwest, Kabul does not accept Islamabad’s claims that the Durand Line drawn by the British Raj between undivided India and the subcontinent at the end of the 19th century is the legitimate boundary between Afghanistan and Pakistan.
Territorial disputes would not have mattered if India and its neighbours had built open economies. Instead, they all turned to state socialism that de-emphasised trade and connectivity. As a consequence, what was an integrated economic space under the Raj broke up into several inward-oriented markets.
The global compulsions for economic reform in the early 1990s had also set the stage for regional integration. If New Delhi was a hesitant reformer at home, it has been equally tentative in its efforts to rewrite the economic map of the region. The few initiatives that India has taken in Saarc in recent years have, however, run into political problems.
This unfortunate situation is unlikely to change at the Kathmandu summit. For example, it is not yet clear if Pakistan is ready to sign the regional agreements on rail, road and energy connectivity that have been drafted for the Kathmandu summit. Even if it signs them, it is by no means guaranteed that Islamabad will implement them. The experience of the South Asian free trade agreement that Pakistan was unwilling to extend to India is a case in point. Pakistan’s argument is simple: as long as it has political problems with India, it will not let regional economic integration proceed.
The merits of this argument are for the Pakistanis to decide. Whether Delhi agrees with the Pakistani argument or not, it must come to terms with it. Where does that leave the PM who has talked ambitiously about trade and connectivity for the subcontinent?
Modi has three options. The first is to focus on a two-speed Saarc. As Delhi waits for better relations with Pakistan, it could, in the interim, move towards subregional cooperation. In the east, India can take steps to foster integration with Nepal, Bhutan and Bangladesh. In the south, it can construct deeper links with the Maldives and Sri Lanka.
The second is to build on transregional institutions like the BIMSTEC, which connects the eastern subcontinent with parts of Southeast Asia or join Chinese Silk Road initiatives that hope to connect different parts of the subcontinent with various regions of China.
While India can do much on the first and second, it is the third way that offers Modi the greatest opportunity — unilateral action. Modi, for example, has already proposed, unilaterally, to build a Saarc satellite for use by its neighbours.
Former foreign secretary Shyam Saran has suggested that Modi could open India’s market for goods produced in the neighbouring countries by reducing tariff and non-tariff barriers and improving trade facilitation. Delhi could also consider transit to its neighbours — for instance, letting in overland trade between Bangladesh on the one hand and Nepal and Bhutan on the other. Modi can also announce unilateral visa liberalisation.
Instead of negotiating the setting up of a Saarc bank, Modi could unveil an Indian financial facility for liberal lending to transborder connectivity projects in the subcontinent. If he can break from Delhi’s old mindset, a strategy of positive unilateralism would allow Modi to push the subcontinent a little faster towards long overdue regional integration.

The writer is a distinguished fellow at the Observer Research Foundation, Delhi and a contributing editor for ‘The Indian Express’

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