Wednesday, May 5, 2010

Saarc's Snarky Politics

Launched in Bangladesh in 1985, the South Asian Association of Regional Cooperation was supposed to mimic the success of another trading bloc, the Association of Southeast Asian Nations. At its 25-year anniversary last week, it's clear that politics—pure and simple—has gotten in the way.

Like Asean, Saarc was meant to spark cross-border trade and investment that would raise living standards in one of the poorest regions of the world and help bridge the political chasms created by India's 1947 partition. But Saarc soon became a victim of political infighting and mutual mistrust. India-Pakistan's continuing disputes over Kashmir and terrorism presented the biggest hurdle. In 1998, both countries went nuclear; the next year, they fought a limited war. Then in 2008, Pakistani militants held Mumbai ransom for three days, killing over 170 innocents.

Saarc has been in political deep freeze ever since. But even before that, the group has done little to realize its grand vision for trade sans politics. India remains reluctant to commit to binding tariff cuts. The other nations, such as Nepal, Afghanistan and Bangladesh, are economic minnows. Sri Lanka was mired in a costly civil war that consumed almost all of its government's energies until recently.

These political spats have also sometimes directly interfered with what should be private business dealings. For instance, when the Tata Group, one of India's foremost conglomerates, wanted to drill for natural gas in Bangladesh some years ago, then Bangladeshi prime minister Khaleda Zia refused. She was reportedly close to the Pakistan leadership, which didn't want Dhaka to create economic linkages with New Delhi.

The result is that with an estimated 1.5 billion people, or 23% of the world's population, Saarc's eight member states—from Afghanistan to Bangladesh, via India, the Maldives, Nepal, Pakistan, Bhutan and Sri Lanka—remain extremely rich in natural resources, but mired in poverty. Average per-capita incomes are a measly $880. In contrast with Asean, where internal trade averages 25%, intra-Saarc trade is, at $687 million annually, less than 3% of the members' total trade.

Breaking the India-Pakistan political logjam is the key to any hope for progress. New Delhi has long been unwilling to sustain an economic relationship with Islamabad so long as Pakistan-sponsored intelligence forces attack India. At last week's meetings, Saarc's other members finally showed some irritation. The Maldives' president, Mohamed Nasheed, told the two to "compartmentalize" their problems. (In Saarc-speak, that's the equivalent of a dressing down.)

There's reason for hope. India's Prime Minister, Manmohan Singh, and Pakistan's Yousef Raza Gilani took a walk together and agreed to get bilateral talks back on track, which also bodes well for Saarc. Last week in an interview in Thimphu, Bangladesh foreign minister Dipu Moni said he not only welcomed the Tata investment back, but said that Dhaka was seriously interested in a free trade treaty with India. Sri Lankan president Mahinda Rajapaksa may also consider an India trade deal.

Prime Minister Manmohan Singh has often talked of an economic union of South Asia, of how the partition of the subcontinent in 1947 destroyed many natural political and economic connections across the region. If Saarc has any hope of achieving its mission, India and Pakistan must set aside politics in favor of the economics. After all, isn't that what a trade bloc is for?


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