Hamid Ansari bats for greater economic integration among Saarc nations

New Delhi: The persistence of restrictive non-tariff measures, lack of harmonisation of standards and customs procedures and poor connectivity are some of the issues hindering the economic integration of South Asia, vice president Hamid Ansari said on Wednesday while inaugurating the seventh South Asia Economic Summit (SAES).

At the inauguration—just weeks ahead of the summit of South Asian heads of state in Kathmandu—Ansari listed “high transportation costs, inadequate cross-border infrastructure, and absence of regional transit” besides the limited availability of short-term trade finance in the region as other impediments to South Asia’s economic integration.

“The overall objective of South Asian Economic Union (SAEU) is to ensure the transformation of South Asia into a peaceful, stable, and prosperous region. Saarc (South Asian Association for Regional Cooperation) countries must consider the mutual benefits that could be derived from greater economic integration and thereby contribute to the furtherance of their common developmental agenda. They should, therefore, collectively address the challenges that confront them in the process of regional integration,” Ansari said in his speech.

Though “intra-regional exports have increased to about $22 billion in 2013 from $10 billion in 2006,” the “average time and costs of trading across borders in South Asia is still relatively high in comparison with other developing regions of the world,” he said.

“Moreover, in South Asia, the costs of trade with countries outside the region appear to be lower than that for carrying out intra-regional trade. Clearly, a truly integrated region would not be achievable until we overcome these challenges,” Ansari said, adding that “an efficient, secure and integrated transport network is essential to support the realisation of South Asian Economic Union.”

“Regional trade liberalization alone has not been able to achieve increased intra-regional trade. Infrastructure development, capacity-building measures, removal of non-tariff barriers and supportive policies and institutions that promote economic activities along identified transport corridors are essential to increase regional trade,” the vice president said.

The SAES—launched in 2008 to bring together premier think-tanks in the region to discuss economic issues—comes just weeks before Kathmandu hosts the 18th Saarc summit. The heads of state of Afghanistan, Bangladesh, Bhutan, India, the Maldives, Pakistan and Sri Lanka besides host Nepal will participate in the two-day summit starting 26 November. The outcomes arrived at in the New Delhi SAES meeting will be put before the Saarc leaders for their consideration, organisers said.

The idea of Saarc was first mooted in 1980 and the first Saarc summit was held in Dhaka on 8 December 1985, when the organisation was established by the governments of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. Since then the organisation has expanded by accepting one new full member, Afghanistan, in 2007 and several observer members.

Despite nearly three decades of existence, Saarc’s achievements have been modest compared to the Association of Southeast Asian Nations (Asean) and the European Union on which the South Asian grouping was modelled. The lack of progress on many issues including regional economic integration has been blamed by many on bickering between member states, especially India and Pakistan, who share tense relations over their dispute over Kashmir.

In his comments, Rehman Sobhan, chairman of the Dhaka-based Centre for Policy Dialogue said that the 18th Saarc summit had engendered “great expectations” because of “a number of political changes across the region through democratic processes.”

He was referring to the new governments elected in India and Afghanistan this year. India’s April-May national polls brought Prime Minister Narendra Modi to power, while Afghanistan’s power transition brought former finance minister Ashraf Ghani Ahmadzai to the helm in September.

“Our expectations will therefore be once again renewed as to what may come out from the summit,” Sobhan said, pointing to the rapid economic growth taking place in many countries in Asia.

“India at least has become part of this trasnformative process... in purchasing power parity terms, India is likely to become the third largest economy in the world. We would expect that India’s dynamism and growth, could in fact, become a very critical leverage in bringing about further transformation in the (Saarc) member states around it. Unfortunately, this process is not so apparent,” Sobhan said.

In contrast was China whose growth and dynamism had played a significant role in leveraging growth and structural transformation in the Southeast Asian and the East Asian region, Sobhan said. “Our hope would be that an economy of India’s size will in fact provide similar stimulant to its neighbouring countries,” he said.

“The danger that we actually face is ... the possibility that India itself may participate in this transformative process but its smaller neighbours may be left standing ... and in their own individual ways attempt to re-connect to the Asian region largely through the medium of access to Chinese investments and other Southeast Asian resources... this will be an exceedingly unsatisfactory way and it will not permit us to exercise the leverage and bargaining power which the population and history of South Asia demands that it exercises when it participates in the new Asia ahead of us,” Sobhan warned.

He hoped Modi in his address at the Saarc summit would signal India’s intent to play a “transformative role in reintegrating the South Asian community.”