Rajiv Kumar Director Chief Executive, ICRIER, New Delhi Lecture at BIDS, Dhaka, 27 December 2009

1. Rajiv Kumar Director & Chief Executive, ICRIER, New Delhi Lecture at BIDS, Dhaka, 27 December 2009

3. Areas of cooperation Too many areas of cooperation.Too many areas of cooperation.

4. Institutional Mechanisms SAARC Secretariat: Located in Kathmandu, Nepal The Secretariat comprises the Secretary General, seven Directors and the General Services Staff Seven Technical Committees under the Regional Integrated Programme of Action (RIPA): Agriculture and Rural Development Health and Population Activities Women, Youth and Children Environment and Forestry Science and Technology, and Meteorology Human Resources Development Transport. Article VI of the SAARC Charter allows for the formation of Technical Committees (TCs). The Integrated Programme of Action (IPA) consisting of a number of TCs was identified as the core areas of cooperation. Over the period of years, the number of TCs were changed as per the requirement. The TC s formulate specialized programmes and projects in their respective fields Article VI of the SAARC Charter allows for the formation of Technical Committees (TCs). The Integrated Programme of Action (IPA) consisting of a number of TCs was identified as the core areas of cooperation. Over the period of years, the number of TCs were changed as per the requirement. The TC s formulate specialized programmes and projects in their respective fields

5. Institutional Mechanisms (Contd.) Committee on Economic Cooperation (CEC) comprising Commerce/Trade Secretaries of Member States established in 1991. SAARC Chamber of Commerce and Industry (SCCI), bringing together the National Chambers of Commerce and Industry of Member States, established in 1992. Eleven Regional Centres run by a Director from the host country and staff from the member states: Agricultural Information Centre (Dhaka); Meteorological Research Centre (Dhaka); Human Resource Centre (Islamabad); Coastal Zone Management Centre (Maldives); Information Centre (Nepal); Energy Centre (Pakistan); Tuberculosis and HIV/AIDS Centre (Kathmandu); Documentation Centre (New Delhi); Disaster Management Centre (India); Cultural Centre (India); Forestry Centre (Bhutan) Five Working Groups created in January 2004, to take forward collaboration in new and emerging areas : Telecommunication and Information and Communication Technology (ICT); Biotechnology; Intellectual Property Rights (including Traditional Knowledge); Tourism; Energy. The Twenty-fourth Session of the Council of Ministers (Islamabad, 2-3 January 2004) approved the establishment of the Working Group in the 5 areas.The Twenty-fourth Session of the Council of Ministers (Islamabad, 2-3 January 2004) approved the establishment of the Working Group in the 5 areas.

6. Recent Key Developments SAARC STORM: Joint programme conducted by India, Bangladesh, Nepal and Bhutan to monitor severe thunderstorm in the region (2009). Telemedicine Project: Inaugurated in Bhutan in April (2009). SAARC Energy Trade Study (SRETS): Completed with the assistance of the Asian Development Bank (ADB) (2009). (Special Meeting of the Working Group to examine the trade options identified by the SRETS and prepare an action plan) SAFAS: Agreement on trade in services likely to be finalised soon. SARSO :Agreement on establishment of South Asian Regional Standards Organisation signed: 4 countries have already ratified it (2008). The SAARC STORM is a coordinated field programme for Severe Thunderstorm Observations and Regional Modeling (STORM) over the SAARC region SAFAS : South Asia free trade agreement on services STORM- A coordinated field programme for Severe Thunderstorm Observations and Regional Modeling (STORM).A proposal was submitted to the 14th Governing Board (GB) meeting of SMRC held in November 2008. The GB approved the STORM programme for conducting the experiment jointly with India, Bangladesh, Nepal and Bhutan during the pre-monsoon seasons (April-May) of 2009-2012. The SAARC STORM is a coordinated field programme for Severe Thunderstorm Observations and Regional Modeling (STORM) over the SAARC region SAFAS : South Asia free trade agreement on services STORM- A coordinated field programme for Severe Thunderstorm Observations and Regional Modeling (STORM).A proposal was submitted to the 14th Governing Board (GB) meeting of SMRC held in November 2008. The GB approved the STORM programme for conducting the experiment jointly with India, Bangladesh, Nepal and Bhutan during the pre-monsoon seasons (April-May) of 2009-2012.

7. Recent Key Developments (Contd.) SAARC Development Fund (SDF): Agreement to establish at the 15th Summit (2008). (SDF now operational and India is the only SAARC member to have contributed its full commitment of US$189.9 million) SAARC Regional Multimodal Transport Study (SRMTS) by ADB (2007): Identified nine pilot, sub regional and regional project Included road, rail and air links Projects to link Afghanistan, Pakistan, India and Nepal were identified in second ministerial meeting

8. Recent Key Developments (Contd.) Regional Food Bank: Ratification by members (less Afghanistan) to set up with total reserve of 2.43 ml. tonnes of food stock (2007). (Food bank did not prevent the steep rise in food prices in 2008) South Asian University :Agreement for setting up the South Asian University was signed during the 14th SAARC Summit (2007) (A project office established in New Delhi, India,2009) SAFTA: Signed in 2004, became operational in 2006. (Intra region trade still very low)

9. Tangible Gains? Outcomes not commensurate with official statements: Projects have been identified under Technical Committees and Working Groups, but the implementation is slow. Poor resources and technical capacities to monitor and evaluate the activities of the Regional Centres. The projects of the Regional Centres not demand driven The SAARC Multimodal Transport Study completed in 2007 is very promising, but the pace of progress is slow. Tangible gains though small are confined to trade. Four regional centres do not have the web links for further details in the SAARC website The reports of various technical committees and working groups are not available in the public domain. The information in the SAARC Regional information Centre (Nepal) is not updated. Four regional centres do not have the web links for further details in the SAARC website The reports of various technical committees and working groups are not available in the public domain. The information in the SAARC Regional information Centre (Nepal) is not updated.

10. Outstanding Issues Intra-regional trade as a proportion of the world trade has remained low, 4.7% in 2008 Informal trade accounts for 72 % ($1.5 bn) of formal trade in the region Figures for 2008 include Afghanistan’s trade as well.Figures for 2008 include Afghanistan’s trade as well.

11. Outstanding Issues (Contd.) Barriers to formal trade: Weak port and transport infrastructure Restrictive rules of origin Persistence of high levels of overall protection

12. Outstanding Issues Barriers to Formal Trade (Contd.)

13. Outstanding Issues Barriers to Formal Trade (Contd.)

14. Outstanding Issues (Contd.)

15. India’s Changing Stance From perceiving SAARC as being against its interest to a recognition of its assymetric role Since the formation of SAARC, neighbouring countries have feared India’s hegemony in the region India now recognises that it should undertake asymmetrical responsibility to assuage fears of member countries Unilaterally reduced negative list of items from 744 to 480 for SAARC LDCs. A task force has been set up by the Ministry of Commerce to address NTBs faced by partner countries.

16. India’s Changing Stance (Contd.) Agreement for setting up the South Asian University was signed during the 14th SAARC Summit (3-4 April 2007). India has enacted the SAU act (2009) and established a project office in New Delhi. Has agreed to fund the Telemedicine project (inaugurated in Bhutan, 2009) and also act as the hub. Plan to set up 50 automated weather stations in Nepal, Bhutan, India and Bangladesh (2009). India voluntary allocated $100 million to the SAARC Development Fund in addition to the assessed contribution (2008).

17. India’s Changing Stance (Contd.) Since 2007, India-Bangladesh investment restrictions removed. India-Pakistan investment decisions now made on a case by case basis. Residual fears of India’s hegemonic intentions need to be addressed.

18. The Way Forward Confidence building measures to be undertaken: Trade expanding measures in place and in the pipeline to be pursued with greater vigour. Strengthening of the SAARC secretariat by bringing in more professional expertise and increasing the number of people. SAARC process to be made more broad based by including professionals, business community and civil society. Successful completion of agreed initiatives: Starting the transport corridors identified in the SMRTC Study by ADB. Early completion of the on going work on identifying and eliminating non-tariff measures. Measurable indicators to evaluate the goals should be initiated.

19. The Way Forward (Contd.) The realization that a ‘relative over emphasis’ on border measures discourage regional co-operation. Regional cooperation needed to address issues like poverty, mal-governance and inequitable growth. Create a better understanding of neighbouring cultures and societies.

20. The Way Forward (Contd.) India-Bangladesh co-operation can set a new paradigm for SAARC integration. Recent Initiatives: India has agreed to offer transit facilities to Bangladesh to access Nepal & Bhutan. Both sides agreed to movement of containerised cargo by rail and water for bilateral trade Bangladesh agreed to provide access to Ashuganj Port as a new port of call as well as the use of Chittagong port by India Both sides have agreed to enhance cooperation in the power sector and India has agreed to provide at least 100 MW to Bangladesh on a priority basis. The renewal period of the Protocol on Inland Water Transport and Trade, which governs the bilateral movement of goods through inland waterways, has been extended from one month to two years

21. The Way Forward (Contd.) Joint approach to Multilateral Development Banks for regional cooperation required. Re-explore sub-cooperation among the four Eastern member countries Encourage cross-border cooperation between neigboring countries.

22. Thank You

23. Drivers of Integration

24. Economic & Non-Traditional Gains Greater regional output and resource utilization. Significant expansion of intra-industry trade and commerce. Geographical specialization across the region esp. in agricultural sector. Greater investment flows due to the creation of larger market.

25. Political & Strategic Gains Large country-small country dynamics. Large countries build new geopolitical alliances. Small countries learn to effectively deal with larger trading blocs in multilateral negotiations. A unified market for hydrocarbon imports from Central and West Asia. Negotiating advantage in multilateral forums.

26. Political and Strategic gains (contd.) Potential gains through alliance with Central Asian countries – Afghanistan’s membership Energy trade – Confidence-building measure Lock-in mechanism

27. Developmental and Environmental Efficiency Gains Integrated approach towards provision of regional public goods like- Environment Water conservation Infrastructure Natural resources – including regional ecosystems and related bio-diversity. Tackle the negative externalities- Drug and human trafficking Floods, pandemics Ecological degradation

28. Non-economic gains Politically stable and tension-free region would result in – Greater FDI, remittances Low defense budgets