SAARC

SAARC: An Emerging Trade Bloc, Its Barriers and Facilitators

Chapter 1: Introduction

The growth of regional trade blocs has been one of the major developments in

international relations in recent years. Virtually all countries are members of a bloc, and

many belong to more than one. Regional agreements vary widely, but all have the

objective of reducing barriers to trade between member countries. At their simplest,

these agreements merely remove tariffs on intra-bloc trade in goods, but many go

beyond that to cover non-tariff barriers and to extend liberalization to investment and

other policies. At their deepest, they have the goal of economic union and involve the

construction of shared executive, judicial, and legislative institutions. The past decade

also witnessed qualitative changes in Regional Integration Agreements (RIA). There

have been three major developments:

1. The move from “closed regionalism” to a more open model, in line with

prevailing views about national economic policy. Many of the trade blocs that

were formed between developing countries in the 1960s and 1970s were based

on a model of importsubstituting development, and regional agreements with

high external trade barriers were used as a way of implementing this model.

New-wave RIAs (some of which are old agreements resurrected) are generally

more outward looking and more committed to boosting rather than controlling

international commerce.

2. The recognition that effective integration requires more than simply reducing

tariffs and quotas. Many other types of barriers have the effect of segmenting

markets and impeding the free flow of goods, services, investments, and ideas,

and wide ranging policy measures—going well beyond traditional trade policies—

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are needed to remove them. Such “deep integration” was first actively pursued in

the Single Market Programme of the European Union (EU), but its elements are

now finding their way into the debate on other regional agreements.

3. The advent of “North-South” trade blocs in which high income countries and

developing countries are equal partners. Perhaps the most important example is

the North American Free Trade Agreement (NAFTA), formed in 1994 when the

Canada–United States Free Trade Agreement (CUSFTA) was extended to

Mexico. The EU also has North-South arrangements, including the Europe

Agreements that link the EU with the transition economies of Eastern Europe, a

customs union with Turkey, and agreements with many Mediterranean countries.

In addition, the EU is committed to negotiating reciprocal trade agreements

(economic partnership agreements, or EPAs) with the African, Caribbean, and

Pacific (ACP) countries.

NEED FOR REGIONAL INTEGRATION

Many factors lay behind the recent spurt in regionalism. The important among them are as follows.

Governments’ wish to bind themselves to better policies— including democracy—and to signal such bindings to domestic and foreign investors.

A desire to obtain more secure access to major markets The pressures of globalization, forcing firms and countries to seek efficiency

through larger markets, increased competition, and access to foreign technologies and investment

Governments’ desire to maintain sovereignty by pooling it with others in areas of economic management where most nation states are too small to act alone RTAs convey advantages as well as limitations.

By reducing the number of participants in the negotiation they can help expand the discussion to include more dimensions of economic integration. Compared with unilateral liberalisation, political support for RTAs also seems to be greater given the perception of reciprocity from other member countries. Although RTAs have varied components, these agreements include some or all of the following eight elements (Bhagwati and Panagariya, 1996 provide an overview):

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(i) A tariff liberalization program—TLP (transformation of nontariff barriers, e.g. quotas, to their tariff equivalent and the sequential reduction of tariffs; special considerations to least developed countries are not uncommon);

(ii) Sensitive lists (goods or services to be exempt from the tariff reduction program);

(iii)Rules of origin—ROO (prevention of the application of the preferential tariffs to non regional goods or services as defined by the agreement);

(iv) Institutional arrangements (establishment of a council or administrative committee responsible for the administration and implementation of the agreement);

(v) Trade facilitation policies (collection of instruments to reduce transaction costs of importing and exporting, including homogenization of customs practices and technical assistance especially to the least-developed members);

(vi) Dispute settlement mechanism (procedures to report and deal with violations to the agreement);

(vii) Safeguards measures (suspension of preferential treatment on grounds that imports are causing or threatening to cause serious injury to the domestic industrial base).

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Chapter 2 : Origin and Evolution of SAARC

After the analysis of theories of globalism and regionalism, it becomes imperative to find

out the rationale for regional cooperation in South Asia. Besides, it is desirable to look at

the evolutionary process of regional cooperation in South Asia to assess the pace of

regionalism in reaching at its present destination as SAARC. The evolution passed

through four phases that include: Conception (1977-80) The Meeting of Foreign

Secretaries (1981-83), The Meeting of Foreign Ministers (1983-85), and The Summits

(1985-2004). The first concrete proposal for establishing a framework for regional

cooperation in South Asia was made by the late president of Bangladesh, Ziaur

Rahman, on May 2, 1980. Prior to this, the idea of regional cooperation in South Asia

was discussed in at least three conferences: the Asian Relations Conference in New

Delhi in April 1947, the Baguio Conference in the Philippines in May 1950, and the

Colombo Powers Conference in April 1954.

Since 1977, the Bangladesh president seemed to have been working on the idea of an

ASEAN-like organization in South Asia.

During his visit to India in December 1977, Ziaur Rahman discussed the issue of

regional cooperation with the new Indian Prime Minister, Morarji Desai. In the inaugural

speech to the Colombo Plan Consultative Committee which met in Kathmandu in

December 1977, King Birendra of Nepal gave a call for close regional cooperation

among South Asian countries in sharing river waters. President Ziaur Rahman

welcomed the King’s call during the former’s visit to Bangladesh in January 1978.

President Ziaur Rahman had also informally discussed the idea of regional cooperation

with the leaders of South Asian countries during the Commonwealth Summit in Lusaka

(1979) and the Non-Aligned Summit in Havana (1979). However, the Bangladesh

president seems to have given a concrete shape to the proposal after his visit to Sri

Lanka and discussion with the Sri Lankan president, J.R. Jayawardene, in November

1979.

Several factors seem to have influenced President Ziaur Rahman’s thinking about

establishing a regional organization in South Asia during 1975-1979:

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(1) Change in the political leadership in South Asian countries and demonstration of

accommodative diplomacy by the new leaders;

(2) Ziaur Rahman’s need for Indian support to legitimize his coup d’état regime;

(3) An acute balance of payment crisis of almost all South Asian countries which was

further aggravated by the second oil crisis in 1979;

(4) Failure of the North-South dialogues, and increasing protectionism by the developed

countries;

Publication of an extremely useful background report by the Committee on Studies for

Cooperation in Development in South Asia (CSCD), identifying many feasible areas of

cooperation; assurance of economic assistance for multilateral cooperative projects on

sharing water resources of the Ganga and Brahmaputra by United States President

Jimmy Carter and British Prime Minister James Callaghan during their visit to India,

Pakistan and Bangladesh in January 1978; and the Soviet military intervention in

Afghanistan in late December 1979 and the resulting rapid deterioration of South Asian

security situation. During this critical period, President Ziaur Rahman’s initiative for

establishing a regional organization which would give the leaders of South Asian

countries an opportunity to improve their understanding of one another’s problems and

to deal with conflicts before they turned into crisis, became much more appealing. While

the Bangladesh proposal was promptly endorsed by Nepal, Sri Lanka, the Maldives and

Bhutan, India and Pakistan were skeptical initially. India’s main concern was the

proposal’s reference to the security matters in South Asia. Indian policy-makers also

feared that Ziaur Rahman’s proposal for a regional organization might provide an

opportunity for new smaller neighbours to regionalize all bilateral issues and to join with

each other to gang up against India. Pakistan assumed that it might be an Indian

strategy to organize the other South Asian countries against Pakistan and ensure a

regional market for Indian products, thereby consolidating and further strengthening

India’s economic dominance in the region. However, after a series of quiet diplomatic

consultations between South Asian foreign ministers at the UN headquarters in New

York from August to September 1980, it was agreed that Bangladesh would prepare the

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draft of a working paper for discussion among the foreign secretaries of South Asian

countries. The new Bangladesh draft paper, sensitive to India’s and Pakistan’s

concerns, dropped all references to security matters and suggested only non-political

and non-controversial areas for cooperation. Between 1980 and 1983, four meetings at

the foreign secretary level (April 21-23, 1981, Colombo; November 2-4, 1981,

Kathmandu; August 7-8, 1982, Islamabad; March 28-30, 1983, Dhaka) took place to

establish the principles of organization and identify areas for cooperation. After three

years of preparatory discussions at the official level, the focus of discussion shifted to

the political level in 1983. The first South Asian foreign ministers’ conference was held

in New Delhi from August 1-3, 1983, where the Integrated Programme of Action (IPA)

on mutually agreed areas of cooperation (i.e., agriculture, rural development,

telecommunications, meteorology, health and population control, transport, sports, arts

and culture, postal services and scientific and technical cooperation) was launched. The

foreign ministers at this conference also adopted a Declaration on Regional

Cooperation, formally beginning an organization known as South Asian Regional

Cooperation (SARC). Following the New Delhi meeting, three more meetings of the

foreign ministers were held at Male (July 10-11, 1984), Thimpu (May 13-14, 1985), and

Dhaka (December 5, 1985) to finalize details and determine a date and place for the

first meeting of South Asian heads of state. At the Dhaka foreign ministers’ meeting, a

decision was taken to change the name of the organization from South Asian Regional

Cooperation (SARC) to South Asian Association for Regional Cooperation (SAARC).

The change in the acronym was based on the thinking that while SARC refers to the

process of South Asian Regional Cooperation, SAARC marks the establishment of an

association (organization) to promote and develop such cooperation. Finally, the first

summit meeting of the heads of state or government of South Asian countries was held

at Dhaka from December 7-8, 1985.

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Chapter 3: Aims and Objectives of SAARC

The South Asian Association for Regional Cooperation (SAARC) comprising

Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka is a dynamic

institutionalized regional cooperation in South Asia, basically perceived as an economic

grouping to work together for accelerating the pace of socio-economic and cultural

development.

The objectives of the association as defined in the SAARC Charter are:

• To promote and strengthen collective self-reliance among the countries of South Asia;

• To contribute to develop mutual trust, understanding and appreciation of one another’s

problem;

• To promote active collaboration and mutual assistance in the economic, social,

cultural, technical and scientific fields;

• To strengthen cooperation with other developing countries;

• To strengthen cooperation among themselves in international forums on matters of

common interest; and

• To cooperate with international and regional organizations with similar aims and

purposes.

Cooperation in the SAARC is based on respect for the principles of sovereign equality,

territorial integrity, political independence, noninterference in internal affairs of the

member states and mutual benefit. Regional cooperation is seen as a complement to

the bilateral and multilateral relations of SAARC members. Decisions are taken on the

basis of unanimity. Bilateral and contentious issues are excluded from the deliberations

of SAARC. Though economic cooperation among South Asian nations was not a new

phenomenon yet the quest for economic integration remained inhibited by the colonial

heritage of these countries. Since 1985, SAARC has evolved slowly but continuously

both in terms of institutions and programmes. However, it is true that most of the

programmes and achievements of SAARC exist on paper. The much talked about

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SAARC Food Security Reserve could not be utilized to meet the needs of Bangladesh

during its worst natural disaster in 1991. It is also true that most SAARC activities are

confined to the holding of seminars, workshops, and short training programmes. These

activities may be useful, but they do not address priority areas and lack visibility and

regional focus so essential for evolving a South Asian identity. Most importantly,

SAARC suffers from an acute resource crunch. Unless the organization is successful in

mobilizing funds and technical know-how from outside sources, most of its projects

cannot be implemented and, thus, its relevance will remain limited.

3 A) Salient Features of the Organization Secretariat

The SAARC Secretariat is based in Kathmandu. It coordinates and monitors

implementation of activities, prepares for and services meetings, and serves as a

channel of communication between the Association and its member states as well as

other regional organizations. The Secretary General, who is appointed by the Council

of Ministers from member countries in alphabetical order for a three-year term, heads

the Secretariat. Mr. Q.A.M.A. Rahim from Bangladesh is the current Secretary General.

The previous Secretaries Generals were from Bangladesh, India, Maldives, Nepal,

Pakistan and Sri Lanka. The next Secretary General is to be from Bhutan. Seven

Directors on deputation from member states assist the Secretary General. The SAARC

Secretariat and member states observe 8 December as the SAARC Charter Day.

SAARC Regional Centers

Regional Centers covering Agriculture, Tuberculosis, Documentation, Meteorological

Research and Human Resource Development have been established in different

SAARC capitals: SAIC (Dhaka, 1998) STC (Katmandu, 1992) SDC (New Delhi, 1994)

SMRC (Dhaka, 1995) SHRDC (Islamabad, 1999) SCC (Kandy, 2004) SCZMC (Malé,

2004) and SIC (Katmandu, 2004). In addition, three new regional centers covering

Culture, Coastal Zones Management, and Information are being established.

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Chapter 4: Summits

Summits which are the highest authority in SAARC, are supposed to be held annually.

The country hosting the Summit also holds the Chair of the Association. Bangladesh

hosted the Thirteenth Summit in November 2005 at Dhaka as the Chairperson of the

Association. India will host the Fourteenth SAARC Summit in 2007 as its Chairman.

South Asia’s regional cooperation, international political and economic environment,

poverty alleviation, advancing economic cooperation, funding mechanisms, security of

small states, combating, terrorism, social, natural disasters and environmental

challenges as an agenda for third decade of SAARC was also discussed in the

Thirteenth Summit. Enhancing people-to-people contact and cultural cooperation,

political cooperation and external linkages of SAARC was also discussed. SAARC

member states welcomed the request by the Islamic Republic of Afghanistan for

membership and invited Afghanistan as a member, subject to the completion of

formalities. SAARC member states also agreed in principle with the desire of the

People’s Republic of China and Japan to be associated as observers. The Agreement

on Mutual Administrative Assistance in Customs Matters Establishment of SAARC

Arbitration Council, and the Limited Agreement on Avoidance of Double Taxation and

Mutual Administrative Assistance in Tax Matters were signed during the thirteenth

SAARC Summit The Council of Ministers comprising Foreign Ministers, meets at least

twice a year. Its functions include formulating policy, reviewing progress of regional

cooperation, identifying new areas of cooperation and establishing additional

mechanisms that may be necessary.

The Standing Committee comprising Foreign Secretaries, monitors and coordinates

SAARC programmes of cooperation, approves projects including their financing and

mobilizes regional and external resources. It meets as often as necessary and reports

to the Council of Ministers. The Association also convenes meetings at Ministerial Level

on specialized themes. The Committee on Economic Cooperation consisting of

Secretaries of Commerce oversees regional cooperation in the economic field. During

the Twelfth Summit in Islamabad, the SAARC Social Charter was signed in order to

address social issues such as population stabilization, empowerment of women, youth

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mobilization, human resource development, promotion of health and nutrition, and

protection of children, which are keys to the welfare and well-being of all South Asians.

South Asian States have adopted Conventions on the Suppression of Terrorism

(including Additional Protocol signed in January 2004 in Islamabad), Narcotic Drugs and

Psychotropic Substances, Trafficking in Women and Children, and Child Welfare in

South Asia. An Agreement on Food Security Reserve is also in place. During the 12 th

SAARC summit held in Islamabad the leaders of South Asia reiterated their commitment

to form South Asian Economic Union (SAEU). If formed, it will pave the way for more

ambitious — but entirely achievable — goals such as a Free Trade Area, an Economic

Union, open borders, and a common currency for the region. As President Pervez

Musharraf said, “we must expand SAARC charter to discuss bilateral issues at the

regional level. There can be no development in the absence of peace. There can be no

peace, so long as political issues and disputes continue to fester.” The Twelfth Summit

renewed the urgency to deal with poverty in the region. For this purpose, the Summit

directed the Independent South Asian Commission on Poverty Alleviation (ISACPA) to

submit to the next Summit a comprehensive and realistic blueprint setting out SAARC

President Pervez Musharraf’s statement reported by M. Aftab, “Can Safta lead to South

Asian Economic Union?” The News, 19 January, 2004. SAARC: Origin, Growth,

Potential and Development Goals for the next five years in the areas of poverty

alleviation, education, health and environment.

The Governors of the Central Banks of member states under the auspices of

SAARCFINANCE meet regularly to consider cooperation in financial matters. For

strengthening cooperation in information and media related activities of the Association,

the Heads of National Television and Radio Organizations of member countries meet

annually. Similarly, the SAARC Audio-Visual Exchange (SAVE) Committee

disseminates information both on SAARC and its Member States through regular Radio

and TV Programmes. In the field of education, the Member States cooperate through

the forums of SACODiL (SAARC Consortium on Open and Distance Learning) and

Heads of Universities Grants Commission/Equivalent Bodies. Memoranda of

Understanding have been signed to promote collaboration with UNCTAD (United

Nations Conference on Trade and Development), UNICEF (United Nations Children’s

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Fund), UNDP (United Nations Development Programme), UNESCAP (United Nations

Economic and Social Commission for Asia and Pacific), UNDCP (United Nations Drug

Control Programme), ITU (International Telecommunications Union), APT (Asia Pacific

Tele-community), WHO (World Health Organization), UNIFEM (Untied Nations Fund for

Women), CIDA (Canadian International Development Agency), EC (European

Commission), PTB (German Metrology Institute), WB (World Bank), ADB (Asian

Development Bank), UNAIDS (Joint United Nations Programme on HIV/AIDS) and

SACEP (South Asia Cooperative Environment Programme). Regular dialogues with

other Regional Organizations such as ASEAN (Association of South-East Asian

Nations), ECO (Economic Cooperation Organization) and PIFS (Pacific Islands Forum

Secretariat) are held with a view to promoting cooperation among sub-regional

organizations.

The Association promotes interaction on multilateral issues of common concern to its

members and has identified areas in which collective positions could be projected at

international forums. These include trade, finance, environment, agriculture, women

and children, Information and telecommunications. Beyond official linkages, SAARC

also encourages and facilitates cooperation in private sector through the SAARC

Chamber of Commerce and Industry (SCCI), which is a SAARC Apex Body. Other such

bodies are SAARCLAW and South Asian Federation of Accountants (SAFA). In

addition, the status of SAARC Recognized Bodies has been accorded to professional

groups in South Asia including Architects, Management Development Institutions,

University Women, Town Planners, Cardiologists, Dermatologists, Teachers, Writers,

Insurance Organizations, Diploma Engineers, Radiological and Surgical Care Societies.

The Association of Speakers and Parliamentarians enjoy special recognition by the

Heads of State or Government.

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Chapter 5: Achievements

Several factors such as political, economic, security and potentiality of mutual economic

benefit through regionalism seem to have influenced President Ziaur Rahman’s thinking

about establishing a regional organization in South Asia.

SAARC’s existence, however, has enabled South Asian political leaders to meet

regularly and carry on informal discussions to address their mutual problems. This is no

mean achievement given South Asia’s past history and low level of interaction among

South Asian countries since their independence. Informal talks among the leaders at

regularly held SAARC meetings have led to inter-elite reconciliation on many sensitive

issues, producing some noteworthy results in South Asia. The informal talks between

the Indian and Pakistani Prime Ministers at the second SAARC Summit meeting at

Bangalore in November 1986 led to the diffusion of tension between the two countries

on the issue of India’s military exercise, Operation Brasstacks, on the Indo-Pakistan

border, and the India-Sri Lanka talks at the 1987 SAARC foreign ministers’ meeting led

to theiraccord on the Tamil problem. As a result of an informal meeting and discussion

between Prime Minister of India and Pakistan, Narasimha Rao and Nawaz Sharif, at

Davos (Switzerland), in 1992, the Pakistani government took action to prevent the move

of the Jammu and Kashmir Liberation Front (JKLF) to cross the ceasefire line in

Kashmir later that year. The Davos meeting was possible because of an earlier informal

agreement between the two leaders at the sixth SAARC Summit meeting at Colombo in

December 1991. Given this utility of SAARC, can the organization grow or expand its

role in the coming decades? The Heads of State or Government during the Ninth

SAARC Summit agreed for the first time that a process of informal political consultations

would prove useful in promoting peace, stability, amity and accelerated socio-economic

cooperation in the region. The leaders reiterated this intent during their Tenth and

Eleventh Summits in Colombo and Kathmandu respectively also. The Agreement on

SAARC Preferential Trading Arrangement (SAPTA) was signed in 1993 and four rounds

of trade negotiations have been concluded. With the objective of moving towards a

South Asian Economic Union (SAEU), the Agreement on South Asian Free Trade Area

(SAFTA) was signed during the Twelfth Summit in Islamabad in January 2004. SAFTA

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may enter into force by the end of the year 2006. The Association has carried out

Regional Studies on trade, manufactures and services, environment and poverty

alleviation, SAFTA and Customs matters. Since its inception in 1984 there have also

been serious differences among member countries over the aims and functioning of

SAARC. Such differences have been pronounced in verbal bickerings in several

SAARC meetings. This is in the face of the fact that closer social, economic and cultural

ties (the espoused ideals of SAARC) are considered the one and only hope for building

regional cooperation efforts in South Asia in the coming years. Indeed, increasing

rationalization of world trade and the fluidity of the emerging global system has

increased trade within each trade bloc and those countries that do not belong to any

trade blocs are likely to be the losers.

This also provides a strong rationale for sustaining the SAARC vis-à-vis future trade

prospects of South Asia. The assumption that peace can be achieved through SAARC

without addressing the political problems of the region has neither been able to cultivate

peace nor to invigorate the SAARC process successfully. Though since its very

inception it has been regularly able to hold Summit meetings yet there have been

interruptions in between owing mainly to intrastate conflicts between the member

countries.

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Chapter 6: SAARC Conventions

6 A) SAARC Convention On Preventing And Combating Trafficking In Women

And Children For Prostitution

EMPHASISING: That the evil of trafficking in women and children for the purpose of

prostitution is incompatible with the dignity and honour of human beings and is a

violation of basic human rights;

RECALLING: The decision of the Ninth SAARC Summit (May, 1997) that the feasibility

of a regional Convention to combat the grave crime of trafficking in women and children

for prostitution should be explored;

RECALLING ALSO: The relevant international legal instruments relating to prevention

of trafficking in women and children, including the Convention for the Suppression of

Trafficking in Persons and of the Exploitation of Prostitution of Others, 1949; Convention

on the Elimination of all Forms of Discrimination against Women, 1979; International

Covenant on Civil and Political Rights, 1966; and the Convention on the Rights of the

Child, 1989;

GIVING: Due regard to the implementation of the recommendations of the various

pertinent International Bodies and Conferences including the Fourth World Conference

on Women at Beijing (1995);

NOTING: With concern the increasing exploitation by traffickers of women and children

from SAARC countries and their increasing use of these countries as sending, receiving

and transit points;

RECOGNISING: In this regard the importance of establishing effective regional

cooperation for preventing trafficking for prostitution and for investigation, detection,

interdiction, prosecution and punishment of those responsible for such trafficking;

EMPHASISING: The need to strengthen cooperation in providing assistance,

rehabilitation and repatriation to victims of trafficking for prostitution;

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SCOPE OF THE CONVENTION

The purpose of this Convention was to promote cooperation amongst Member States

so that they may effectively deal with the various aspects of prevention, interdiction and

suppression of trafficking in women and children; the repatriation and rehabilitation of

victims of trafficking and prevent the use of women and children in international

prostitution networks, particularly where the countries of the SAARC region are the

countries of origin, transit and destination.

Other such conventions:

Convention on Promotion of Welfare of Children

Convention on Mutual Assistance on Criminal Matters, July 2008

SAARC Charter of Democracy

Inspired by the common objectives of all South Asian States to promote the welfare of

their peoples, to provide all individuals with the opportunity to live in dignity, and to

realize their full potentials as enshrined in the SAARC Charter;

Also inspired by the general objectives of all South Asian States to promote peace,

freedom and social justice;

Further inspired by their shared commitment to the rule of law, liberty and equal rights of

all citizens;

Reaffirming faith in fundamental human rights and in the dignity of the human person as

enunciated in the Universal Declaration of Human Rights and as enshrined in the

respective Constitutions of the SAARC Member States;

Recognizing that inclusive policies, including constitutional protection developed in

keeping with the wishes of the people, are essential for developing trust and

understanding between and among communities;

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Affirming that broad-based participation of people in institutions and processes of

governance creates ownership and promotes stability;        

Convinced that economic growth and social development based on justice and equity

and democracy are interdependent and mutually reinforcing;

Reaffirming that the pursuit of inclusion, good governance, and poverty alleviation,

especially the elimination of extreme poverty, are essential to the promotion and

consolidation of democracy;

Aware that tolerance and diversity are critical in creating effective foundations for a

pluralistic democratic society; and

Convinced that undemocratic and unrepresentative governments weaken national

institutions, undermine the Constitution and the rule of law and threaten social cohesion

and stability in the long-run.

The Member States of the South Asian Association for Regional Cooperation (SAARC),

in the spirit of consolidating democracy in South Asia, hereby commit to:

Reaffirm the sovereignty of each Member State;

Ensure the supremacy of their respective Constitutions and uphold their spirit;

Continue to strengthen democratic institutions and reinforce democratic

practices, including through effective coordination as well as checks and

balances among the Legislature, the Executive and the Judiciary as reflected in

the respective Constitutions;

Guarantee the independence of the Judiciary and primacy of the rule of law, and

ensure that the processes of appointments to the Judiciary as well as the

Executive are fair and transparent; Adhere to the UN Charter and other

international instruments to which Member States are parties; Recognize the role

of political parties and the civil society in a democracy; and Renounce

unequivocally any unconstitutional change of an elected government in a

Member State;

Accordingly, Member States undertake to:

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Reinforce the linkage of development and democracy;

Promote sustainable development and alleviation of poverty through good

governance, equitable and participatory processes;

Promote democracy at all levels of the Government and the society at large;

Strengthen democratic institutions and processes in all national endeavors with

due focus on decentralization and devolution;

Promote equality of opportunity, equality of access and equality of treatment at

the national level, in keeping with the respective constitutional provisions, as

safeguards against social injustices and stratification;

Inculcate democratic values in society through education and awareness

building;

Ensure gender mainstreaming in government and society;

Uphold participatory democracy characterized by free, fair and credible elections,

and elected legislatures and local bodies;

Encourage all democratic forces  in South Asia, including elected representatives

of the people,  to unite against any unconstitutional change in government in any

South Asian country, and work towards the restoration of democracy in keeping

with the SAARC Charter; and

Promote adherence to these decisions and fulfillment of this Charter, if necessary

through an institutional mechanism.  

Chapter 7: Barriers towards Trade among SAARC

Barriers mean any policy or regulation that restricts international trade. These may be

embargos, import duties, import licenses etc. These barriers are the cause of low trade

among SAARC states.

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Hinge Barriers on Security and Democracy

In order to promote regional cooperation India bind the neighboring states in ties of

different networks through the project of SAARC. India shares ethnic, language, cultural

and religious histories. Harshe (2005) mentioned that India refused to attend the 13 th

summit of SAARC and the reason was shaped by two main factors. First, recently

events occurred in Bangladesh such as attack on Sheikh Hasina, the deaths of Bilal-ud-

din, a journalist and former finance minister Shah A.Kibria in two separate bomb blasts.

Second, through suspension of the democratic and constitutional processes King

Gyanendra‟s seizures of power in Nepal also promoted India to refrain from sharing the

platform with the Gyanendra regime.

Spillover Effects of Crisis in Nepal

The political system of Nepal is internally challenged by Maoists. Maoists have been

trying but have not merely established their control over 40% of territory of Nepal, The

Deuba regime failed to improve the law and order situation and tackle the Maoist rebels

whom in return gave King Gyanendra a pretext to take over the administration in Nepal.

Nepal strategic location has high value for major powers. Since Nepal borders China

and India, the dominant forces in Nepal therefore can prove crucial to either of these

powers. Nepal’s frontier is only 185 miles away from New Delhi. That is why India’s

stability and friendship with Nepal is essential to strengthen its security.

Inadequate Security Environment

Two vast areas of illicit opium production namely Golden crescent and Golden Triangle

constitute problems to health security. The threat of terrorism also constitutes

challenges to development cooperation from two leading countries Sri Lanka and

Pakistan. A momentary semblance of peace in the sub-continent has been established

with the ongoing talks to promote peace by Indo-Pakistan and the assurance of

preventing any terrorist operation from its soil by President of Pakistan. Similarly, peace

seems to escape Sri Lanka in spite of the three-year-old Oslo-initiated reconciliatory

process between the Liberation Tigers of Tamil Eelam (LTTE) and government of Sri

Lanka. The formation of joint mechanism comprising of the LTTE and the government to

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disburse funds in the tsunami-affected areas has been held as LTTE wants to

monopolize post tsunami reclamation work in the northeast. It is easy to assuage the

impact of terrorism by promoting dialogic processes in inter and intra-state civil societies

within the SAARC countries. The success of SAARC is based upon the economic and

commercial bonds among the SAARC member states.

Indo-Pak Cooperation

If both India and Pakistan focus on the economic aspects of their ties, the strain

between both the countries may be mitigated. When the nuclear test was conducted in

1998 the trade among Indo-Pak peaked to $345 million. The highest Indian Exports to

Pakistan was during the government of Musharraf (Taneja, 2004). India was awarded

the title of Most Favorite Nation (MFN) to Pakistan as a trading partner. India can export

different kinds of minerals like iron ore, steel etc, and transport equipments like

motorcycles, scooters and passenger cars etc. Moreover it can also export textile and

number of agricultural products. Whereas, Pakistan contributes in the exports like fruits,

spices, pulses, nuts etc to India. India is more powerful and strong in its economic

conditions as compared to economy of Pakistan. Energy sector cannot be ignored to

promote Indo-Pak Cooperation.

Two Sided Conflicts and Tensions Prevailing among Countries

These are such conflicts that are between the member states or the neighboring states

that may be due to the conflict in the laws and regulations that vary across the

boundaries of the member states. These are the prudential regulations of each member

state, such conflicts causes hindrance in the easy import and export of the trade

essentials among the SAARC countries. Such conflicts can be handled by the mutual

agreements among the SAARC member states. That will be beneficial for both of the

bilaterally conflicting states. © Centre for Promoting Ideas, USA

India and Pakistan

The two prominent countries existing in the region, India and Pakistan are commonly

known as traditional rivals, since 1947. The most important conflict is the Kashmir’s

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issue. Pakistan, as a Muslim country, supports Kashmir’s freedom slogan and this is the

main reason why India opposes Pakistan strongly. The bitter relations between the

countries were mounting day by day. Lack of trust between these two countries leads to

low exports and imports. Trade relations are so weak. India supposes Pakistan as a

terrorist country for no reason. Wars of 1965, 1971 and Kargil war were broke between

Pakistan and India. The conflicts between these two countries are still unsolved.

Governments at both sides are trying to solve the problems and to improve trade

relations for this purpose. Many policies are made but it is hard to implement these

policies until the most important factor trust will remain absent. Struggles should be

made by the higher authorities to create a trustworthy relationship between these two

countries.

India and Sri Lanka

System relating to caste- “inferiority of mankind‟ was very common in Srilanka in

1980s.India made many efforts to resolve this conflict in 1983.Indian government

started to compassionate a specific class in Srilanka (Tamils) that raised many conflicts

between these two countries. India was in favor of Tamils. India sent IPKF (Indian

peace keeping force) in Srilanka to support Tamils that was displeasing for Srilanka and

thus, Srilankans demanded for the termination of IPKF. In 1990, India started to help

Srilankan government as a whole without keeping in view the specific class. The

negative thinking of Srilankans about Indians was reduced to some extent and they

started cooperation with each other.

India and Bangladesh

When Pakistan was established, India started supporting the East Pakistan (now

Bangladesh). There are many conflicts existing between India and Bangladesh.

Disputes were arisen on Farrakka barrage, on river island of Mahurichar, on building

fence on the international border by India. All these issues are still unsolved. India

20

opposed Bangladesh of being compassionate to Pakistan whereas Bangladesh blamed

India for helping its specific states rebels.

India and Nepal

There were bitter relationships between India and Nepal. Many of the conflicts were not

resolved. There relations were so unfriendly when SAARC was constituted. Indian

government opposed Nepal’s step towards gaining atomic energy i.e. weapons from

China. Indian government was afraid that if Nepal did so then it will lose its hold from

Katmandu. The dispute between India and Nepal was very prominent but it had no

affect on Indo Nepal relations. India supported Nepal when its political and economic

condition was declining. Thus the relations between these two countries were made

strong by their governments. (Khan et al., 2007)

Political Issues Relating to SAARC

SAARC does not interfere in the internal affairs of its member countries. It paid attention

towards the major issues. In its 12thand 13thmeeting, discussions were made for the

better relationships of all SAARC countries. In a nutshell, SAARC is responsible for

establishing strong trade relationships among its countries. Many conflicts are therefore

exists among them on several issues. The higher authorities are trying to solve these

problems and work for their better prospects.

Chapter 8: Facilitations to Trade among SAARC

As there are a lot of obstacles in trade, that creates hindrance in the ways to imports

and exports across the regional boundaries. Similarly, there are various ways to

facilitate the trade across the member states, these facilitations may be provided by the

21

governmental regulations or by the management of the SAARC. These facilitations help

to promote as well as try to remove the obstacles in the way to trade among the SAARC

member states. Promotion of trade under various prospects includes: political

measures, competitive measures, trade integration.

Political and Economic Measures

Combined efforts of Pakistan and India facilitate trade by solving political and economic

issues. Their combined efforts improve trade by eliminating visa problems, tariff and

nontariff obstacles, by exploring various other routes of trades and by developing

relations among financial institutions. These efforts also help their nationals in

performing their religious norms by clearing the path between Lahore and Amritsar

where Nankana sahib is located (one of the religious leader of Sikh population all over

the world).By the collaboration of Pakistan and India the amusement among both the

countries is also enhanced by the permission of Indian films show in Pakistan cinemas.

(Naqvi & Schuler, 2007)

Collaboration Leads to Increased Trade Flows

The MFN status provided by India enhances the trades of Pakistan i.e. very nominal

amount of items were the part of Pakistan trade that has dramatically increased to a

large amount of items. The list of such trade items is still not transparent by its rate

increases to about 50%. Pakistan-India Trade Has Increased Sharply over the 2004 to

2006 Source: SBP, Pakistan

Reforms of Economy and Institutions

For the purpose of enhancing the economic growth, reforms were brought into being by

the beginning of 1998. These resources made Pakistan better able to take the

liberalization concept forward progressively. Tariff rates that were increased

22

dramatically in every passing year now move towards decline with each passing year up

to 2006.

Sector-wise Decline in Tariff Rates

The tariff rates among various sectors of the economies of various member states of

SAARC is declining very rapidly with the passage of years from 1995 to 2006 and up

till now it is decreasing, that facilitate and enhance the trade activities over the borders

of different member states. Lowest tariff rates are prevailing among the three renowned

economies (Bangladesh, India, and Pakistan) among SAARC. At last the government

minimizes the tariffs under the statutory regulations. In Pakistan tariff rates are reduced

like that of the leading states of Nepal and Sri Lanka.

Import Tax Rates and Fiscal Reforms

The basis of tax rates are increased that make the government better able to manage

the obstacles of import rates. Enhanced tax rates causes a lot of harms to all the

sectors of the economy in the prospect of performance of the sectors but it provide clear

ways to the illegal activities.

Enhanced Tax Basis and Elimination of Custom and Excise Rates

The rates available for trade i.e. for importing and exporting and the clearance charges

of such trade items are reduced over the period of time in the past 15 years. There is a

dramatic decline in these trade and clearance rates. But on the other hand there is an

upward trend as seen in the local tax charges i.e. in the income tax and sales tax rates.

Tax Reforms, Trade Measures and Minimized Tariffs

Pak Revenue Admin Limited makes the management system of trade rates net based

i.e. by the use of computerized techniques. It facilitate the traders to move via the

feasible efficient path for the purpose of good clearance .Such a system enables the

23

management to take better calculation of risk factors, the clearance time of the trade

goods is minimized, and to promote trade.

Impacts of Applied Reforms

The size of economy is increasing dramatically by the fast upward trend in exporting the

items, importing the essential and by the uphill investments. This all progress is just

because of the relief in the tax rates and the increased intentions of the trade

management to help the traders. The GDP growth rates are moving sharply down in the

past year increases rapidly in the next phase then there is a decline in the year2005-06

but the optimum rate is seen in the year 2004-05. Now there is a moderate rate

reporting in the previous year. Trade clearance time is also reduced, this enhances

trade openness in Pakistan.

Enhanced Trade among The Member States and Enlargement of Economy

Size

For the promotion of the trade, SAPTA is revised into a new agreement SAFTA that

puts down the basis for the enhanced area in the world for the purpose of trade in such

a region where there is maximum population. It provides the measures for the purpose

of clearance of trade items across the regional boundaries of the member states, for

enhancing the competition among the states and provides an effective trade mechanism

for the member states. All the countries belonging to the SAARC gives the conformation

for the acceptance of this trade agreement.

Facilitations Toward Trade Among SAARC by The Provisions of SAPTA

It helps in the settlement of trade rates across the regional borders i.e. tariff rates for the

purpose of tax rate fixation on local level, Para-tariff are the tax rate fixation over

international level. There are some other tax rates that are given other then the before

24

mentioned rates called non-tariff rate. There are also some direct trade measures

provided by this agreement that helps the mutual trade among the member countries. It

facilitates dealing of this agreement with the LDCs i.e. it gives free tax or zero rates for

the purpose of clearance of the trade items either exporting or importing the products

across the member states. The restrictions implied by this agreement are also

eliminated for LDCs. Shrestha, 1997 also discussed if any of the member states of

SAARC facing the economic harms like obstacles in the payment clearance, trade

facilitating measures eliminate different conditions provided by this agreement like the

given volume and the value of trade items provided by the contracting agreements. If

any relived item of trade harms the agreement parties or the member states, the

importing regional country will eliminates that relief. If the origin of these regulations are

confirmed, then relief on the trade items are eliminated provided under the legal

provisions of this agreement. The legal regulations of this agreement help the

collaborating regional states of SAARC to resolve the conflicting matters among the

member states of this regional cooperation.

Recent measures stated in a meeting by the President of SAARC Chamber Of

Commerce and Industry with the deep concern for trade between Pakistan and India,

Tariq Saeed, the president of SAARC connotes that:

The non government agencies and corporations take the progressives steps

towards the trade and also taking steps towards the poverty alleviation.

By developing trustable relations among the neighboring countries, SAARC leads

towards achieving the high status globally.

SAFTA resolved the tariff problems for the purpose of promoting the trade among

all the member states, LDCs are zero rated among all the other member states of

SAARC.

Pakistan will be able to interact with a large population for the purpose of

importing and exporting its goods.

To overcome the monopoly created by the zero rated products of other member

states, Pakistan has to bring the technological improvements for the purpose of

25

achieving the improved productivity and having the competitive advantages over

the products of other states.

In the early sixties, Pakistan and China were at the same trade level but China

promotes its trade with a rapid increased rate but the Pakistan is still on the way

to progress.

For the purpose of better management and for implementing reactive trade

measures headquarters of SAARC are required to be built in Islamabad, for

which funding is required.

Chapter 9: Positive Steps Towards Facilitation Of Trade In South Asia

Role of WTO

Trade organizations providing trade facilities to the countries, which have become the

prominent feature of that organizations. Chaturvedi, 2007 mentioned NGTF (Negotiating

26

group for trade facilitation), worked for the development of underdeveloped countries

and its basic purpose is to improve Articles V, VIII and X of GATT 1994.The main focus

is on providing trade facilities to South Asian countries namely, Bangladesh, India,

Pakistan, Nepal and Sri Lanka.

Bangladesh

National Board of Revenue (NBR) of Bangladesh works under Internal Resources

Division (IRD).NBR has the authority of making policies and implementing tax structure

in Bangladesh. The solutions for enhancing trade are explained in the articles which are

given below:

Legal Regulations

Nepal and Bhutan, which are entirely occupied by land, wanted to use the sea

ports of Bangladesh. Bangladesh is not situated near these two countries. The

solutions relating to documents filing, securities, guarantees, charge on goods

transport are not clearly explained in this article. (Article V).

There was clear cut fee and charges on goods import and export, these charges

are in the form of flat rates. The payments are made through automated software

guided by World Bank. For the establishment of customs modernization plan, an

EDI system was formulated in Bangladesh. (Article VIII).

Government of Bangladesh made efforts for making trading process much

easier. All the information was readily available on internet i.e. charges, duties,

tax etc. That helps in saving time and the system of making appeals to higher

authorities was introduced for the convenience of trading parties. (Article X).

India

Central Board of Excise and Customs (CBEC) in Bangladesh is the authority of deriving

solutions for trade enhancements, which are clearly explained in the articles given

below:

27

Legal Regulations

Indian customs worked for making trade procedures much easier. Customs are

for making strong trade relations among countries. Tax free structure on goods

transport was introduced by India. A trade agreement has been signed by India

and Nepal, and with Bhutan an agreement was signed in 1995. Struggles are

carried out to make agreements with Afghanistan. (Article V).

Several measures were adopted by the customs department to make convenient

trade process. A system has been introduced for publishing data quarterly. The

ministry of commerce and trade are making efforts for the advancement of trade

in India (Article VIII).

All the policies and procedures introduced by the Indian Government are

available on the websites which were launched by Central Board of Excise and

Custom. Furthermore the system relating to measures of controlling risk was also

introduced. It is elaborated in Article X.

Nepal

Many reforms were made in Nepal for the development of trade in 1985. Efforts also

were made to form Inland clearance depot at various points. Possible trade measures

given in the articles are:

Legal Regulations

Trade facilitation measures were introduced. Trade agreement was signed

between India and Nepal for better convenience. Efforts are also made for

improving infrastructure to facilitate trade. But for the reason that Nepal is entirely

occupied by land, many features of this article are not suitable for it (Article V).

Fees structure is readily available on internet to help traders. Free information

was provided to them. However, the information regarding to rules and

regulations were kept confidential (Article VIII).

A website containing all the information regarding trade was launched by the

customs department. The anticipated changes and future plans were not

28

published there. Moreover, customer care centers were established for providing

help to the customers (Article X).

Pakistan

Ministry of Commerce, Trade Development Authority of Pakistan (TDAP) and Federal

Board of Revenue are responsible for the development of trade in Pakistan. Trade of

Pakistan is very low. Possible measures are made by the government of Pakistan to

establish trade reforms for its enhancement. Trade facilitation measures are discussed

below:

Legal Regulations

National Trade and Transport Facilitation Projects were launched in Pakistan to

develop trade that helps to make the trading project easy and convenient (Article

V).

Training centers were established for the guidance of traders. Relations among

countries were made strong for better trade. Online information system was

introduced. Hence advanced trade methods were used for facilitation (Article

VIII).

Policies related to trade are widely available on internet, tracking system was

introduced, risk controlling measures were established and paper transactions

were minimized due to the availability of internet (Article X).

Sri Lanka

Department of Commerce of Sri Lanka has the authority to work for the trade

enhancement. The steps taken by the department in the articles are given below:

Legal Regulations

29

Article V gives easy procedures for the clearance of transported goods. The audit

of late arrival has also been conducted. Measures were taken for the controlling

of risks anticipated in the trade.

Online payment system was introduced along with same fee structure for all kind

of traders. Duties were minimized on imports and exports. The filing of

documents was made simple only for the convenience of traders, so that they

can easily work for the better prospects (Article VIII).

Introducing that the internet facility has made trading process much and more

easy. All rules, regulations and all types of trade information are available there.

Many trade agencies have their own websites for providing information to the

concerned traders (Article X).

Conclusion

Though the formation of SAARC is a landmark step taken by the leaders of the region,

the main rational behind its establishment is to develop a congenial environment

through summit diplomacy where all nations may interact peacefully with each other,

30

cultivate sustainable peace and promote mutual economic well being by harnessing

available resources in the region through the peaceful process of economic integration.

Nevertheless, after 21 years of establishment, neither South Asian nations have been

able to push the process of integration into full swing nor the organization itself has

become viable enough to promote peace, harmony and economic integration or prevent

conflicts in the region. The political tensions and conflicts surrounding the countries of a

South Asia pose a question of uncertainty and challenge to the formation of South Asian

Union at par with European Union that would allow free movement of people; common

currency and common foreign and economic policies which ultimately will sow the

seeds of peace. In order to achieve the objectives the SAARC would have to evolve into

a full-fledged ‘regional entity’ that can cultivate peace in the region. The realization of

durable peace and the future of economic integration through SAARC depend upon the

ability and interest of South Asian leaders to resolve domestic as well as long-standing

differences through peaceful deliberations.

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